Sluggish Retail

Last year, at this time, I published a graphic showing the monthly retail sales of General Merchandise Stores—by way of illustrating the problems faced by retail trade—yes, even in this, the biggest, selling season of the year (link).

I thought that I would show an updated version of that chart. Here it is:

Last year I only had a few early months of 2012 to show. This time I show all of 2012 as well as results for 2013 through September.

Note particularly that these stores did better than in the earlier year in 2010, 2011, and in 2012. But when we look at 2013, the values achieved in that year fall right at, below, or slightly above the sales performance in 2012 all depending on the month. You might say that no real growth is showing at all. This explains the hysteria behind the Black Friday sales campaigns that I noted in the last post.

To illustrate 2012 and 2013 performance more sharply, herewith a bar graph, by month, of sales up to September. I have include two trend lines. The top line represents 2012, the lower line 2013. Note that trends in 2013 are lower—suggesting, if things continue in the same way for the rest of 2013, that this year will come in worse than last. Not the time to be in the retail business nowadays, as I heard a fellow analyst (and family member) say just yesterday. No. And these days the reliable alternative occupation, somewhere in Health Care, also looks rather dicey…

The data used in this analysis come from the U.S. Bureau of the Census, here, showing various sources of retail data.

Danse Macabre

I had an occasion Thanksgiving last to mark this occasion with an advertisement from Kohl’s. The ad was printed on the plastic sleeve that brought our Thursday edition of the Detroit News. That edition  has been, and remains to this day, by far the thickest, a kind of desperate package of retailer anxiety. Well, it has happened again. Herewith a picture of the 2013 Kohl’s ad:

Nothing like maintaining a tradition, don’t you know. The main difference between the 2012 and the 2013 ad? In 2012 Kohl’s doors opened at midnight on Thanksgiving; this year they will open four hours earlier.

Now I’m only singling out Kohl’s here because of its prominent self-display, for the second Thanksgiving running, looking much the same. But the rest of the paper this year, like last, shows the hysterical anxieties of the retail sector . Paging through the paper today, a single thought, in German at that, rose up in my mind: Totentanz—the Dance of the Dead; the French version produces the nicest headline.

Let us see now. This is the fourth year of our so-called recovery. By recovery our retail sector probably imagines the return of frantic shopping growing at more and more intense rates every year. The public, instead, is holding back. The Spirit of Consumption seems to have fled permanently. To be sure retail sales grew—in 2010, more in 2011, and more again in 2012; the growth, however has been sluggish. The flavor, smell, and rhythm of this growth has not been right, somehow. Is a really big change underway? Is the world recovering from many decades of madness? If so, very major changes in retailing are indeed unfolding in slow motion still and the hysterical danse macabre is thereby explained.

Employment Update: October 2013

Employment data for October 2013 are somewhat ambiguous. A total of 204,000 jobs had been added to the economy, significantly higher than the 148,000 jobs reported for September 2013 last month. But, as usually, the Bureau of Labor Statistics, which reports these data monthly (the press release is here), revised September numbers upward by 60,000 jobs. September results, therefore, at 208,000, were actually better, by a hair, than October results. And for all we know, October results may also be revised next month. We’ll see. Tracking these numbers requires a certain amount of patience before real trends become believable.

Herewith the updated chart:

This year I have been publishing projections of year-to-date numbers out for the total year. Last month and the month before, the annual projections were under-performing 2012. This month’s data show a positive change. It now looks like 2013 will produce a total gain in jobs of 2.236 million, better than the economy managed to do each year in the 2010-2012 period. The graphic showing annual data and the 2013 projection follows:

At the same time, what with nearly four years of recovery behind us, we’ve only recovered 83.4 percent of the jobs lost in the 2008 and 2009 period. At this month’s rate of adding to jobs, we’ll have to wait almost seven months more before we have achieved the employment level we enjoyed in December 2007.

Twitter's Valuation

Twitter—like all of the social media—is totally dependent on advertising revenues from a purely commercial point of view. Like virtually all other so-called tech companies, it is losing money even as it is preparing to go public with an initial public offering (IPO).

The company values itself at $11.1 billion, which seems from out here, viewed through innocent eyes, as rather a huge number considering that it had revenues of $422.2 million as of September of this year, alongside losses of $133.9. Let’s annualize those figures. Extended to 12 months, revenues will be $562.9 in 2013. That would be equivalent to 1.5 percent of total Internet advertising expenditures of $36.6 billion last year. Twitter’s losses for 2013 project to $178.5 million, meaning that its revenues don’t even cover costs yet—never mind profits.

More to the point, advertising, considered as a function of the total economy, is actually much ado about nothing, as I illustrate in the last post. Total ad revenues, all media, stood at $141.7 billion in 2008—and had dropped to $135.9 billion in 2012. Doesn’t look like a growth industry at present.

The message, of course, is that the Tech Bubble continues still. Come to think of it, “tech” seems to produce them. There was the Railway Mania in Britain in the 1840s—an illuminating bit of history worth revisiting as we see the “social media” and “mobility” soaring. There are such a thing as real utility, real industry, and real technology. But when irrational expectations produce investment hysteria, even real estate can have an unreal bubble—based on “innovation” in financing instruments—another “technology.”

Much Ado About Almost Nothing

This is a repost of an entry from the first LaMarotte originally published on July 27, 2009. I revive it now, with an update of the numbers, to support another posting which follows this one.

The Gross Domestic Product in 2008 was $14,264.6 billion (all right, that’s $14.3 trillion). GDP is the sum total of all economic activities in the United States. In that same year total expenditures on advertising amounted to $141.7 billion. With calculator in hand we can determine that advertising is just a sliver under 1 percent of GDP (0.99%).

[Corresponding values for 2012? Here they are: GDP $16,244.6 billion ($16.2 trillion), Advertising $139.5 billion, and advertising as a percent of GDP still only a hair of the total GDP, less than 1 percent (0.86%).]

I was led to make this calculation because today’s Business Day, the business section of the New York Times, perhaps coincidentally, was crowded with stories about advertising or closely related subjects. Stories dealt with (1) curbing commercials, (2) measuring responses to advertising messages, (3) late night TV programming battles (featuring ratings), (4) a TV morning show, (5) the role of giveaways in marketing, (6) NPR activities on the Internet,  (7) a technology convention being used as an advertising medium, (8) promotion of investing by using cartoons,  (9) a trademark battle between brands, and (10) a user-designed magazine and user-designed ads. Other stories were closely linked to the communications field: (a) iPhone, (b) Amazon and the Kindle, (c) a wireless acquisition, (d) Twitter, (e) the digital divide (African Americans are less represented on the Internet),  and (f) a story about the Gannett news organization. Only a single story, about toxic assets, even hinted at the fact that 99.01 percent of the economy [in 2008] might be doing something other than worrying about advertising or the media. I hasten to add here that the New York Times’ coverage of business is usually more diverse.

Since advertising is intrinsically linked with communications, it is visible because it has to be, intrusive because, well, it has to be, and therefore its presence is artificially exaggerated by its very function. We’re barely aware of the rest of the economy—unless some part of it fails us.

Our ways of perception have evolved so that we notice change above all—any deviation from the normal, ordinary, and habitual. Advertising exploits this aspect of our natural design. Our communications media, similarly, can only prosper when they’re seen. Both commercial and regular media therefore attempt to grasp our attention. The two ways to do so are by tempting or by shocking us. The relentless auction that modern life has become therefore produces a highly distorted sense of reality—sex and violence everywhere. But we see virtually none of that unless we’re in contact with media. Interesting. In the chart I’ve inserted, what we see is “All the Rest.” What we see on the media, writ very large, is the little sliver that I’ve labeled “Advertising.” Inverted impressions.

Employment Update: September 2013

Thanks to the government shutdown, this monthly report came yesterday, some 19 days after its regular appearance (first Friday of the month). The results are a gain of 148,000 jobs in September, lower than the number reported for August. These data come from the Bureau of Labor Statistics press release of yesterday (link). The BLS also published revisions for July and for August, netting out to an additional gain of 9,000 jobs. Herewith the graphic:

If we project year-to-date numbers to the entire year 2013, we see that 2013 is likely to turn in a lower gain in total employment than 2012 did. This month, like last, the projection has dropped. Last month in was 2.163 million jobs, this month 2.132 million. That graphic follows:

Despite the theme of the year 2013, which is Sluggish, a positive note is that all but two major sectors show gains. The two posting losses are Finance (down 2,000 jobs) and Leisure and Hospitality, down 13,000. People don’t seem to be in the mood to take a vacation.

It will be interesting to see what impact the October troubles will have had on this all-important indicator of our economic health.

Flash from a Distant Mirror

[Note: This post first appeared on another and earlier version of LaMarotte on June 8, 2009. I have closed that blog because advertisements began to appear on it. Some of the posts from that version, however, are reprinted here.}

The following quote is taken from a history entitled Caesar and Christ, by Will Durant, Simon and Schuster, 1944, pp. 111-112. It deals with an era known as the Agrarian Revolt in the Roman Republic, extending in time from 145 to 78 BC, thus the period immediately preceding the rise of Julius Caesar, who became the first emperor of Rome and thus closed the republican era of Roman history. Durant is summarizing the causes of the revolt:

The first cause was the influx of slave-grown corn from Sicily, Sardinia, Spain, and Africa, which ruined many Italian farmers by reducing the price of domestic grains below the cost of production and marketing. Second, was the influx of slaves, displacing peasants in the countryside and free workers in towns. Third, was the growth of large farms. A law of 220 forbade senators to take contracts or invest in commerce; flush with the spoils of war, they bought up extensive tracts of agricultural land. Conquered soil was sometimes sold in small plots to colonists, and eased urban strife; more of it was given to capitalists in part payment of their war loans to the state; most of it was bought or leased by senators or businessmen on terms fixed by the Senate. To compete with the latifundia the little man had to borrow money at rates that insured his inability to pay; slowly he sank into poverty or bankruptcy, tenancy or the slums. Finally, the peasant himself, after he had seen and looted the world as a soldier, had no taste or patience for the lonely labor and unadventurous chores of the farm; he preferred to join the turbulent proletariat of the city, watch without cost the exciting games of the amphitheater, receive cheap corn from  the government, sell his vote to the highest bidder or promise, and lose himself in the impoverished and indiscriminate mass.

Roman society, once a community of free farmers, now rested more and more upon external plunder and internal slavery. In the city all domestic service, many handicrafts, most trade, much banking, nearly all factory labor, and labor on public works, were performed by slaves, reducing the wages of free workers to a point where it was almost as profitable to be idle as to toil. On the latifundia slaves were preferred because they were not subject to military service, and their number could be maintained, generation after generation, as a by-product of their only pleasure or their master’s vice. All the Mediterranean region was raided to produce living machines for these industrialized farms; to the war prisoners led in after every victorious campaign were added the victims of pirates who captured slaves or freemen on or near the coasts of Asia, or of Roman officials whose organized man hunts impressed into bondage any provincial whom the local authorities did not dare to protect. Every week slave dealers brought their human prey from Africa, Spain, Gaul, Germany, the Danube, Russia, Asia, and Greece to ports of the Mediterranean and the Black Sea….

There is a great deal more along these lines, providing more detail. Durant was a very popular historian in his day, hence a copy of this book may very well be available in a decent local library. Needless to say I recommend a perusal of some pages of this important chapter. It is a kind of mirror held up to us by the past. To be sure, the economic level of Rome was on a lower stage. It was a time when agriculture was the industry and neither fossil fuels (our energy slaves) nor machines to use them had been invented yet. At the same time the public franchise had been obtained by Roman citizens who owned property; the forms of it were complex and comparable in many ways to ours. This posting will give some context to some of my past and future entries regarding the sensitive subject—sensitive because it violates our faith in the Free Market—of a national industrial policy. In the absence of one—and one based on genuine justice and values—has in the past led to chaos.

The term latifundia, plural of latifundium, was a Roman coinage of the time combining the word latus meaning “spacious” and fundus meaning “farm” or “estate.” The foundation of civilization is the fundus, the agricultural land.

Employment Update: August 2013

On the face of it, we gained 169,000 new jobs in August 2013—according to the Bureau of Labor Statistics press release today (link). But the BLS also revised results for both June and July—downward. I am presenting those revisions graphically, just for once, so that their impact may be more viscerally felt. Now if you add the revisions, 16,000 jobs fewer than earlier reported for June and 74,000 fewer than reported for July, the net effect is a loss from totals reported for that period of 90,000 jobs. Therefore August gains, netted out, are only 79,000—which is quite another story. The usual graphic, showing the total picture, follows here:

This year I have been annualizing monthly returns—thus projecting trends, up to the present, out to the entire year. This means totaling monthly gains and dividing that sum by the number of month and multiplying the average by 12. That picture follows.

Note that, as of August, the year 2013 is projected to perform worse than 2012 did—but still better than 2011.

Looking at sectors, Construction and Other Services neither lost nor gained any jobs. Two sectors lost jobs: Information (read communications) and Finance. Retail Trade produced the largest sectoral gain (44,000 jobs) followed by Health Care and Social Assistance (38,000).

Legal or Ethical

A story in the New York Times this morning, the headline in the digest we get is Many Wall Street Banks Woo Children of Chinese Elites, reminds me of the hard-to-describe difference between legal action and ethical behavior.

What is happening here is that firms like Goldman Sachs, Merrill Lynch, and JPMorgan Chase hire the sons and daughters of politically high-placed Chinese leaders in the expectation that they will gain major favors in consequence, not least insider knowledge of how things are arranged in governing circles. Such actions are neither illegal nor yet hidden. (Doing it in the open would seem, indeed, quite beneficial—signaling that your company is well-connected.) At the same time, this sort of thing causes hair to rise up on my arm. It has ethical implication.

Once in my career I walked from the biggest contract one of the companies I was running could have snagged when a lawyer from Louisiana, who had arranged to meet me at O’Hare, where we would both be passing, suggested to me that our company should place some advertisement in a particular magazine. The job was worth half a million, the advertisement about five thousand. But that modest expenditure would have ensured approval of our contract by a Louisiana state agency. A relative of the head of that agency worked at the magazine. We needed that contract—like badly. And nothing would have been traceable. Nor was it illegal to advertise in that or any other magazine. Choking down my disappointment, I walked—and no, I did not first check with the layer above mine.

My own action, even then, would have been viewed as naïve. But, there you are. It all depends on where you live. Is it in the universe of the pragmatic or the universe of the ethical? These days, much the same. And, needless to say, the NYT article does carry the almost obligatory quote usually found in articles such as this one. “But everyone does it…”

Now an even more difficult-to-judge situation. Merrill Lynch manages our various holdings of what is usually referred to as our “wealth.” And Merrill Lynch is one of the Wall Street banks said to participate in Hire the Big Chief’s Child. So how much of that perfectly legal stain will stick to our skin?

Employment Update: July 2013

The new employment data published by the Bureau of Labor Statistics today (link), are certain to produce frowns. Expectations had been for a gain of minimally 185,000 new jobs—and those with their eyes on the stock market hoped for something like 225,000. The actual results were otherwise.

The economy gained 162,000 jobs in July. However, June results were revised downward by 26,000 jobs, and if we factor that change in, the net gain was an anemic 136,000 in new employment. There is definitely a difference between watching jobs and watching the Dow. The Dow is more exciting, no doubt about it. The monthly chart follows:

The annualized projection for the year 2013 has also suffered a small decline. Last month it looked like we would end the year with a gain of 2.422 million jobs added. This month’s result is 2.309 million. It is still better that the gains of 2010 through 2012, but, on the jobs front, anyway, we’re still just threading water. That chart is next.

The positive note, this month, is that all but one of the sectors of the economy posited gains in employment. The only sector falling short, posting a loss, was the somewhat obscure Other Services category; it posted a loss of 2,000 jobs.

Confidence

The word indicates an inner feeling, but sometimes it is best to parse it. It comes from “trust,” combined with “with,” thus trusting with or trusting X. It seems to me that the X is here the issue. We use the word in relationship to the inanimate ranges of reality of well. We’ll test a knot and say that we are confident that it will hold. But when it comes to complex situations that we cannot actually test, like we can test a knot or a beam, the presence of confidence or lack of it has everything to do with people, with agents. Public confidence in the economy—therefore motivating us to spend or to invest—is not produced by careful observation of a mechanical arrangement but comes from a general “feel,” as it were. And much of that feel comes from the news, the media—alongside talking to other people and observing what they do.

The New York Times and the Wall Street Journal both feature stories this morning that certainly shape public confidence. The NYT headline: HOUSE G.O.P. SETS A NEW OFFENSIVE ON OBAMA GOALS. The Journal’s: RANCOR IN WASHINGTON FANS PUBLIC DISAPPROVAL.

It’s really the same story, although the Times’ focus is on actual planned cuts in budget whereas the Journal concentrates on a Wall Street Journal/NBC News poll showing public disapproval of Congress—which has reached an all time high of 83 percent.  Obama’s approval rating was low too, 45 percent. The Founding Fathers would here have talked about the evils of faction. That last word comes from the Latin for “a making or doing” used ever since to mean a political party or a class of persons.

Uncertainty breeds lack of confidence and conflict breeds uncertainty. No. We cannot neatly isolate the political from the economic, the personal from the public. Nor can such things as attitude be put in place by Constitutional language. Yet the performance of a democracy absolutely demands that once an administration has been elected by the public, the political conflict that resulted in that outcome must be brought to a halt; unified action must follow. We now have a situation that, were it manifesting in a person, would make that person highly unreliable. He would no sooner start something than try to destroy it, say something then try to unsay it, promise something and then do the opposite. With such a “person” in charge of our country, can we be confident? Civil war comes in many different forms—acute and violent, insidious and undermining. We have the latter, Syria the former. In a forced choice, I’d rather have ours—but in a free choice I don’t want civil war at all.

The Spreadsheet Never Frowns

My subject is feedback. Or management. Or the nature of too-highly-layered hierarchies. Consider an efficient hierarchy. It will be three-layered at most—and each layer will communicate with the one next to it face to face. In such a situation, people will be talking to each other—and what with frequent contact, will become familiar with each other at the personal level. Our current institutions are vastly more complicated—at least twelve levels in most cases. Furthermore, the chain of command will be further confused by the intrusions of committees. Very often the feedback from customers or clients will come to the top in the completely faded form of pure numbers on a spreadsheet—whereas, when the scale is human, the bad or good news will take the form of a person making a report, one human to another. The problem of size, simply, is that a spreadsheet never frowns—but people do. And when the next layer down arrives at the office with a dark face, one must be prepared to do something about it.

Supposing you were a high-flying trader who sold toxic real estate bonds directly to “widows and orphans”—as Fabrice Tourre, formerly of Goldman Sachs, told his girlfriend that he had done. And suppose the uncles, brothers, or cousins or other muscular relations of those widows and orphans had gotten a hold of Fabrice Tourre and applied to him the “feedback” of beating him to within an inch of his life? He would have learned a whole lot earlier that he was breaking the rules of morality. But twelve-layered hierarchies protected him until now. And he may still get away with it shielded by hosts of high-priced lawyers.

Employment Update: June 2013

The new employment numbers for June arrived this year on the fifth of July (see BLS release). Decent results, actually. Job gains in June were 195,000. April and May results were also updated, for a combined additional gain in those months of 120,000 jobs. This caused April results to come in at 199,000, May results at 195,000. The resulting monthly chart follows.

If we look at these results on an annualized basis, thus January-June results extended to the rest of the year, the economy continues to perform better than it did in 2010, 2011, and 2012. The graphic showing that comes next.

If we look at this on a monthly basis, we get the following. In 2010 we gained on average 85,200 jobs a month, in 2011 175,300, in 2012 182,800, and in 2013, to date, an average of 201,800.

During the Great Recession we lost 8.578 million jobs; in the three-and-a-half years since then we gained back 6.506 million. This means that we’ve now recovered in that much longer period 75.8 percent of job. Its going slowly, but we are gaining.

Recovering jobs lost in the Great Recession is not the same as adding jobs to accommodate the growth in our workforce. An earlier posting (here), shows that we need to add 87,300 jobs to the workforce every month just to accommodate our growing population. So long as we are just recovering lost jobs, we are not creating jobs for the young. Since the Great Recession ended, we have therefore accumulated a demand for 3.7 million new jobs (42 months times 87,300). It’s only after we have regained all losses that job gains will count against that growing deficit. 

Looking at sectors, some sectors were still posting losses. In June these were Manufacturing (down 3,000), Transportation and Warehousing (down 5,100), Information (down 5,000), Miscellaneous Services (down 4,000), and Government (down 7,000). The continuing loss in government employment is a marvel—what with our legislators all clamoring about creating jobs.