2/01/2014

The Economic Recovery That Isn't

Despite the President's claim of economic recovery in his State Of The Union address, there are plenty of indicators that his claim just ain't so.

One of the biggest is retail sales, particularly over the holiday season just passed. Brick-and-mortar store sales were down, but some analysts attributed that to shoppers shifting their buying to on-line venues. But if the earnings report from Amazon is indicative of anything, that wasn't the case.

The title of the company's news release is cheerily optimistic: "Amazon.com Announces Fourth Quarter Sales up 20% to $25.59 Billion." And its operating income actually beat estimates -- $510 million, compared with $489.9 million. But fourth-quarter sales of $25.6 billion were considerably below estimates of $26.08 billion, and earnings per share were 51 cents instead of the 69 cents that analysts had been expecting.

While it's sales were up as compared to the same period the previous year, those sales as well as sales from other on-line retailers came nowhere near making up for the drop in sales from the brick-and-mortar stores. Over all, holiday retails sales were nowhere what they should have been if the economy had truly recovered. When chain retailers such as Sears, K-Mart, JCPenney, and Best Buy are scaling back by closing under/non-performing stores, that is an indication that consumers aren't in a buying mood. Much of that is driven by the fact that consumers are reluctant to part with cash they will need to purchase necessities should the economy remain flat, or that they don't have any spare cash to begin with.

I can certainly attest to both as my family's personal experience with this past holiday season proved both. We cut back our Christmas purchases dramatically, limiting ourselves to one gift among ourselves and very few if any purchases outside our immediate family. We didn't have the spare cash we've had in the past and we had major expenses coming up that we needed to cover.

It's one thing if ours was the only family in this situation, but discussions with friends, co-workers, and extended family proved this to be the rule rather than the exception. Most cut back on their holiday purchases for many of the same reasons cited above. So while the government says things are better, our personal experiences say otherwise. For the same reason we should also take any unemployment numbers the government releases with a grain of salt.

Anyone paying attention should realize that the unemployment numbers used cite only those unemployed who are still collecting unemployment benefits. If the unemployment numbers also included those whose benefits have expired or have given up looking for work that isn't there, then the number is somewhere between two and three times higher than what the government claims. That is not the sign of a recovering economy, but of a stagnant economy, something no one should be celebrating, with Barack Obama's assurance to the contrary.