Depending on which talking head on cable business channels you are listening to, we are in the 6th or 7th year of recovery from The Great Recession of 2008. Everyone cheerfully admits that the economy is recovering at a painfully slow rate, but almost all appear cheerful that things will turn out just fine in the near future.
On Friday, after a brief vacation, from my laptop, TV and most cellphone messages, I was hit with two pieces of downbeat data:
1) The official government figures were readjusted. Originally, GDP growth for the first quarter of 2015, was placed at -.2% but was not said to be -.7% owing to bad weather in the 1st quarter plus the muscular U.S. dollar making American goods less attractive overseas.
2) The US Federal Reserve, hardly a subversive organization, released their report on The Well Being of US Households. The report, as usual, had disturbing statistics for those among us who eat demographics for breakfast. A few highlights were:
--Some 47% of Americans could not cover a $400 emergency or sell something to cover the amount owed. (several of us wondered about whether they could go to friends or relatives)
--31% have gone without some form of medical care in the past year as they could not afford it.
--53% of those earning under $40,000 per year described themselves as “just getting by.”
--Despite the distance from 2008-2009, some 14% are still “underwater’ on their mortgages ( amount owed is great than what they could sell the dwelling for).
I ran these stats by some successful people who said it was “nonsense” or “impossible”.
Then I looked toward less obvious choices. I contacted a broadcaster whom I have known for years in a rust-belt DMA. He said, “Don, of course, the data are accurate. Car advertising has perked up here because the fleet is old (over 10 years) and people’s cars are falling apart and they need to get to work. But, the increases are far lower than most recoveries in the past. The dealers are using alternative media and there is little that we can do. Also, our retail business is awful. Two of our biggest clients closed their doors in the past year. People in our town are not spending--they do not have much money.”
Retail analysts are focusing on companies such as Tiffany’s which recently reported blowout earnings despite the stronger dollar discouraging some European buyers. Their target is not simply the often mentioned to 1% but really covers the top 5% of households who are doing just great. Yet, both Michael Kors and Coach disappointed with earnings lately and their stocks got hammered. Change in consumer tastes? Perhaps.
What is going on? If you want to be entertained and hear some straight talk, google or go on You Tube and watch retail analyst Howard Davidowitz. Unlike the talking heads on the mainstream media, he gives you the unvarnished truth as he sees it. When asked why mid-level retailers are largely struggling he states: “The people do not have any money.”
So, look beyond the New York, Boston and San Francisco’s of the world. Most people are struggling despite stock market strength and strong Tiffany earnings. As a mountain state broadcaster wrote to me, “Recovery, what recovery?”
If you would like to contact Don Cole directly, you may reach him at firstname.lastname@example.org