Job loss takes biggest toll on customers
The rapid decline in gas prices has come at an opportune time for the retail industry, as many Americans have essentially been given a year-end bonus with gas prices now half of what they were just a few months ago. That’s little consolation, however, to the increasingly large percentage of the nation’s population without work or the merchants peddling discretionary items.
During October, the unemployment rate hit a 14-year high of 6.5%, a significant increase from the prior month’s rate of 6.1% and dramatically higher than the 4.8% reported in October 2007. In total, 10.1 million people were without work last month and some of the gloomier economic forecasts envision a scenario where the unemployment rate hits double digits not seen since the recession of the early 1980’s.
The retail industry in general, and particularly a company like Target that derives a large percentage of its sales from discretionary categories such as apparel and home, are in for a challenging time if the gloomiest of economic forecasts unfolds. Consumers can adjust to declining home values and 401k balances since those are paper losses, unless an individual is selling a home or approaching retirement. The issue of job loss is another matter, as it shrinks the amount available for consumers to spend and also causes those who have jobs to become more cautious in their spending as they see coworkers, friends, neighbors or family members lose a job.