Friday, February 13, 2009

Glimmers of Hope

The news of the rise in national retail sales for January was quickly pounded down yesterday. By this morning you had to search for the articles. The sales numbers marked the end of six months of a retail slide. You would think this would be a glimmer of hope, but it doesn't resonate with most reporters take on what's happening, so it was quickly dismissed by the end of the day. It's not that I don't believe the national economy is in trouble, it's just that so much of our problems are based on psychology. I think it's something like 90%. I've learned that economics equal psychology, while I used to think psychology had some influence.

It's the belief that we're heading into a deep recession that has companies laying off hundreds of thousands of people. Economists agreed last year that large companies were running lean and mean, having learned the pain of layoffs from the last recession. Nevertheless, the market practically demanded or at least expected big companies to lay people off, and that's what they did. They were laid off mostly because of the expectation of problems, not because of problems. It reminds me of a scene from my favorite movie, Fifth Element, where the evil Zorg, played by a lovable Gary Oldman, is told that the economy is heating up and his aid suggests firing half a million workers from Zorg Industries. "One million." Zorg tells him out of hand.

As a business owner, economic news has me almost paralyzed. It's not that I can't run my business, it's that common wisdom says that it would be downright criminally irresponsible to take chances right now. Hire an employee? Expand my business? My sales numbers say yes, but all external sources say I must be out of my mind. Pay down debt; hunker down. The real goal of the stimulus package is to get small business owners like me, who account for half the business activity in this country, to start acting normally. It's 90% psychology.

So what do the national retail sales numbers tell me? They somewhat vindicate my experience that things aren't as bad as believed. I think most consumers have quickly adapted to our current scenario. I call it "baseline fucked." Or "How I stopped worrying about the economy and started living my life again." It's been my experience that once you give up hope, you feel a lot better. Congratulations American media for stomping out hope.

Jean-Baptiste Emanuel Zorg


  1. Wal-Mart laid off 800 employees at its home office despite proving by its numbers that it's nearly recession proof.

    Why? Because Wal-Mart has decided to stop expanding during the bad economy. Those 800 people were mostly involved in buying or leasing property, contracting with builders and setting up new stores. Since Wal-Mart isn't currently building new stores they weren't needed anymore.

    It appears that the executives at Wal-Mart decided that despite their good numbers and the evidence they can actually thrive in this economy, they've decided to cut back on expansion, just to hedge their bets. It's basically the retail equivalent of cutting R&D to save expenses at a tech company, and it's totally psychological on the part of the executives making the decisions.

    The good news is that it was a huge wake-up call to people in this area, including politicians, that thought we were recession proof (idiotically, since we've long been affected by the housing market). It's even got one or two of the local mayors publicly questioning the wisdom of having so many jobs in the area reliant on one big company, and wondering if maybe we shouldn't diversify a bit (duh!).

  2. I guess that they've stopped the payments to the local politicos, too.

  3. Sorry for all the typos in this one. I think after I drink my morning coffee there's this period where I think I'm awake, but the drugs are still kicking in. A good time to step away from the keyboard.

    BTW, I did hire someone this week. Jimmy is his name. He replaces an "unofficial" person and should fix some of our understaffing problems. He'll also have shifts where his job is only to clean. I can't really afford him, but I feel like our staffing problems are dragging us down.

  4. At Anonymous: when a large chunk of your electorate gets their paychecks from one company, that company doesn't really need to give you any money in order for you to listen to them. That's one of the reasons that Wal-Mart has stayed and lobbied to improve the infrastructure in this region as they've grown, rather than moving to an area where the infrastructure was already there.

    The flip side of that is when you are that company, and you lay off a large number of people, that's a whole lot of voters that are suddenly going to look favorably on anyone who looks like they are standing up to you.

  5. Fulminata - when you're the big industry in town, the candidates you back tend to be the ones that win.
    When I speak of "payments to politicos" I am speaking of the LEGAL bribery of campaign contributions or help organizing campaign workers, not just the out-and-out bribery you may have been thinking of.

    When an elected official says "What's best for company x is what's best for my community", he is in their pocket - one way or another.

  6. No, I totally understood what you meant, and Wal-Mart actually has at least one PAC that does nothing but lobby for Wal-Mart and gains its funding from Wal-Mart employees (at least they did a decade ago).

    What I meant is that they don't need to contribute to local politicians around here because too many voters already believe that what's best for Wal-Mart is what's best for the area, because they rely on Wal-Mart for a paycheck. They may do it anyway, I don't know, but they don't really need to.

    As an interesting side note, those campaign contributions [i]would[/i] be considered bribes in some other countries. The distinction is one that isn't exactly unique to the US, but it isn't universal either.

  7. A few more reasons to downplay any economic upswings or good news:
    1) Bad news - especially sensationalistic "doom and despair" - sells papers/gets viewers.
    2) Obama needs things to be terrible so we sell out our future for the non-stimulating "stimulus" pork bill, as well as the government takeover of private industry and banking.
    3) If the economy is recovering on its own, then that means that the market is actually self-correcting - meaning that we don't need a bunch of high cost "experts" to tell us how to live.

  8. The stimulus plan has some flaws, but from what I've read (mostly The Economist), it should do the job. My finance buddy whose very conservative, agrees. However, unless banking reform gets on track and a reasonable plan emerges to "fix" mortgage foreclosures, the stimulus may be in vain.

  9. We did a little shopping today as part of our spring cleaning (mostly replacing some broken fixtures and adding some storage items). Target was packed. Park & Shop Center was packed.
    It was like holiday season shopping (not Black Friday, but a December Saturday).
    Were we just unlucky, or are people out spending money?

  10. Even when retail sales are in a slump, they're usually down a few percentage points. Would you notice if people shopped 97% of normal?

    There are also factors for sales shifting. Any sort of nesting related products do well: games, home furnishings, even condoms. People also trade down, so some businesses do better, like car repair shops, because people are more likely to fix their car than buy a new one.

  11. I can understand the restaurants being packed tonight (Valentines Day as well as an afternoon power outage), but was surprised at how jammed the stores were.