Election Stalemate, Increase in Layoffs Could Bode Ill for Holiday Spending
Delayed presidential election results and rising job cuts could be scarier than the Grinch, according to a top retail analyst and a report released Wednesday showing a surge in announced layoffs.
Richard Giss, a partner in Deloitte & Touche in Los Angeles, said he believes the firm’s recent forecast of 5.5% to 6% spending growth over last year, based on a survey of retailers that ended in October, already is being overtaken by events, including the protracted and close race between Al Gore and George W. Bush.
The holiday spending forecast also may be somewhat optimistic because of the downward trend in consumer confidence, poor earnings reports, high fuel prices and continued instability in the Middle East, Giss said, adding that he thinks an increase of 1% to 2% is more likely.
“It depends on how long Florida drags on, which shouldn’t be all that long, and we’re heading right into the start of the holiday season,” Giss said. “It could put us off to a slow start for the holiday season. Because of that, I’m not expecting a huge season.”
Because last year’s sales jumped 7.3% from the previous year, Giss said, even a more moderate increase this year is “not all that bad.”
Average monthly announced layoffs were 43% higher from July through October than in the first half of the year, according to a new report by Challenger, Gray & Christmas Inc., a Chicago-based outplacement firm.
The 43,799 job cuts announced in October, although down 8% from September, were 92% higher than October 1999 and enough to push average layoffs for the last four months to 53,168 per month, compared with an average of 37,237 per month for January through June, the report said.
Announced job cuts were down in October from a July peak of nearly 64,000, bringing the total for the first 10 months of the year to 436,095. That’s 25% lower than the 10-month total of 579,543 that led into the 1999 holiday season, the report said.
By comparison, the number of nonfarm jobs created for the year through October was 1.8 million, according to the Bureau of Labor Statistics.
Still, if the recent pace of job cuts continues or increases through the end of the year, consumer spending could be affected by job insecurity, combined with market volatility, higher fuel prices and a slowing economy, said John A. Challenger, chief executive of the firm.
Challenger has tracked monthly announced job cuts in Securities and Exchange Commission filings and other public releases since the early 1990s. But he does not track actual layoffs.
“The last four months, we’ve seen a big jump in the number of layoffs. We’re returning to the kind of pace, although it is down a bit, that we saw throughout much of ‘98-99, which were the heaviest [announced job-cut] years of the decade,” Challenger said. “As people become more concerned about their jobs, they become more concerned about spending.”
But Pamela Rucker, spokeswoman for the National Retail Federation, said retailers remain confident and are looking forward to a 5.5% to 6.5% increase in spending.
The Washington-based trade association released its annual holiday mood survey conducted by Deloitte & Touche last week and reported that the average shopper anticipated spending about the same as last year, Rucker said.
“We’re looking for a fairly solid holiday season,” she said. “We’re not going to see the kind of gang-buster holiday season we saw last year that exceeded everyone’s expectations.”
