Small Matters: Still a black mood after Black Friday

They were buying by the basketful at a Target store near Covington, La., very early Friday. But consumer confidence is still low, and many people expect things to get worse for them in 2012.
They were buying by the basketful at a Target store near Covington, La., very early Friday. But consumer confidence is still low, and many people expect things to get worse for them in 2012. (DAVID GRUNFELD / New Orleans Times-Picayune)
Posted: November 28, 2011

The National Retail Federation estimates that 152 million people will have shopped on Black Friday - black because that is the day that merchants will finally make money for the year, because of sales that more than cover their costs for the previous 11 months, and taking them out of the "red."

That's a large number. In comparison, only 131 million workers are currently employed, according to the Bureau of Labor Statistics, plus an additional 10 million to 20 million self-employed workers. Additionally, there will be Internet sales that boost the overall volume.

So, what to make of this past Black Friday? Consumers are not particularly optimistic about the course of the economy and, more important, are not optimistic about their own personal circumstances. The University of Michigan Survey Research Center reports that nearly 50 percent of America's households indicated they were worse off financially than a year ago. Only 25 percent said they were better off. Thirty percent of the respondents who said they are worse off blame lower incomes. An additional 25 percent blames rising prices.

Gazing forward, 60 percent expected no change in their financial situations in 2012, and about 20 percent expected deterioration. This leaves just one in five households expecting improvement in its finances, hardly the basis for exuberance in spending.

Before 2008 and the economic collapse, the percentage of those expecting improvement outpaced those expecting deterioration by 30 percent. Indeed, half the households expect inflation to outstrip the rise in their incomes, reducing their real purchasing power.

This squares with reports of recent sales trends by small-business owners: Twenty-two percent reported rising sales for the third quarter of 2011 vs. the third quarter of 2010. But 30 percent reported falling sales trends over the same period.

About 25 percent expect real sales volumes to rise in the fourth quarter of this year, but nearly 40 percent are expecting declines.

Among retailers, 20 percent have reported positive sales trends compared with 36 percent reporting declines and, looking forward, 27 percent expect gains in real sales compared with 41 percent expecting declines. That doesn't sound like a great 2011 holiday sales season.

Overall, the optimism of consumers and business owners is solidly in "recession" territory, although measures have been creeping up in recent months - so the direction is positive even though measured levels are low.

This October's retail-sales numbers were quite good, although it appears that spending increases are being financed by reduced saving and some new borrowing rather than rising incomes, an unsustainable situation.

If we have a good fourth quarter this year, that will certainly provide a boost for employment, as firms hire when they have customers to serve. But Washington, our major source of uncertainty, could derail things by failing once again to provide good solutions to our deteriorating fiscal situation.

Developments in Europe hardly instill confidence that political leaders can do the right thing. Let's hope that ours do and that we can have a happy holiday season.

Bill Dunkelberg is a professor of economics at Temple University and a nationally recognized expert on small business. Contact him at


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