U.S. retail stores are facing a downward spiral in business, and this could precede an economic collapse.
Retail Sector Suffering
Almost daily we hear of layoffs or store closings in the retail sector. And while some argue that this is happening because more people are buying online, this isn’t true. The truth is that consumers are drastically pulling back on spending altogether.
While e-commerce is definitely getting bigger, online shopping is still a fairly small percentage of the total U.S. retail sales figures. For instance, in the first quarter of 2017, online sales accounted for just 8.5% of total U.S. retail sales. (Source: “E-Commerce Retail Sales as a Percent of Total Sales,” Federal Reserve Bank of St. Louis, last accessed July 6, 2017.)
Over 90% of retail sales in the U.S. economy still take place in good-old-fashioned stores.
Retail Sector Suffering
With this said, we are seeing a significant amount of job cuts in the retail sector. From January to May of this year, the number of employees in the retail trade sector declined by almost 80,000. (Source: “All Employees: Retail Trade,” Federal Reserve Bank of St. Louis, last accessed July 6, 2017.)
More job losses in the retail sector are expected as retailers, big and small, continue to close stores at a fast pace.
Below is a chart that illustrates the price performance of some of the well-known retailers in the U.S. economy. As you can see, big American retailers have seen their stock prices slashed.
Chart courtesy of StockCharts.com
Why Retail Crash Signals Economic Collapse
My argument is that the crash in the retail sector foretells an economic collapse.
Dear reader; here are two items of importance:
- After the Financial Crisis of 2008, there was a significant amount of job creation in the retail sector. Now with retailers in a dire situation, retail jobs may not be as available going forward. This could have dire consequences for the overall U.S. labor market, as more than 15.8 million Americans currently work in the retail sector.
- Retailers closing down stores and reducing their workforces will put a dent in consumer consumption; the biggest factor when it comes to calculating the U.S. gross domestic product (GDP). A person who doesn’t have a job doesn’t go to restaurants often and doesn’t buy that new car. (Forget the official job numbers! People who have given up looking for work or who have part-time jobs because they can’t get full-time jobs are not included in the calculations for the U.S. unemployment rate.)
When I say “economic collapse,” I don’t mean an absolute shutdown of the economy. I mean a severe deterioration in economic activity. As I see it, the retail sector is flashing a big warning sign that says, “TROUBLE AHEAD FOR THE U.S. ECONOMY.”