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Economic Recovery Not Yet Arriving

June 12, 2009

With a rise in the number of people continuing to receive jobless aid and companies holding off on hiring, analysts warn an economic recovery is still far off.

The Labor Department said Thursday that initial claims for unemployment benefits fell last week by 24,000 to a seasonally adjusted 601,000. That’s below analysts’ estimates of 615,000, reported the Associated Press.

However, the number of people claiming benefits for more than a week rose by 59,000 to more than 6.8 million, the highest on records dating to 1967. The Labor Department also revised last week’s data on continuing claims, replacing what had been a drop of 15,000 with an increase of 6,000.

The Commerce Department said Thursday total retail sales rose 0.5 percent in May, the first advance in three months, lifted by strong gasoline and building material receipts. Consumers also spent more on food and clothing. Sales fell 0.2 percent in April.

The sales report fed optimism that consumer spending would probably be flat to modestly lower in the second quarter, instead of falling sharply as expected by most analysts.

Spending, which accounts for about 70 percent of U.S. economic activity, rose 1.5 percent in the January-March period, after a 4.3 percent dive in the fourth quarter.

Because rising gasoline prices aided last month’s retail sales gain, consumer purchasing could slow in other areas.

Meantime, the number of U.S. households on the verge of losing their homes dipped in May from April, and the annual increase was the smallest in three years, the AP also reported.

Foreclosure filings fell 6 percent in May from April, according to RealtyTrac Inc. More than 321,000 households received at least one foreclosure-related notice last month–18 percent more than a year earlier–but the smallest annual gain since June 2006.

As layoffs, rather than risky mortgages, become the main reason that borrowers default on their home loans, many economists expect foreclosures likely will remain elevated this year and into 2010.

Banks repossessed about 65,000 homes in May, up from 64,000 in April, due to big increases in several states including Michigan, Arizona and Nevada.

The Obama administration announced a plan in March to provide $50 billion from the financial industry rescue fund as an incentive for the mortgage industry to modify loans at lower monthly payments.

On Wall Street, investors welcomed the better-than-expected report on jobless claims and growth in retail sales, pushing stocks higher Thursday morning. Rising interest rates have recently become a concern and had sent stocks lower on Wednesday.

For further information, visit: http://www.pbs.org/newshour/updates/business/jan-june09/economy_06-11.html


Slowing Down The Economy’s Recovery

June 11, 2009

The number of people receiving unemployment benefits has set another record, a development likely to weigh on consumer spending and slow the economy’s recovery.

While retail sales rose in May, the increase resulted largely from a spike in gasoline prices and higher auto sales, according to a report from the Commerce Department. Overall, the retail report Thursday showed consumers remain reluctant to spend, economists said.

“The jobs picture continues to be one of the most significant challenges to the economy,” said Dean Curnutt, president of Macro Risk Advisors, a financial strategy firm. “It’s very difficult to be bullish on consumer spending when you’re looking at unemployment rates that are so high.”

The number of people continuing to claim benefits exceeded 6.8 million in the week ending May 30, the Labor Department said Thursday. That was the 19th straight weekly record, after a drop last week was revised to an increase.

And that doesn’t include about 2.4 million people receiving benefits through federal and state extended programs, which can add up to 53 weeks to the 26 weeks provided by most states. That means about 8.5 million people received unemployment insurance in the week ending May 23, the latest data available, triple the total of a year ago.

The unemployment rate jumped to 9.4 percent in May, a 25-year high, as employers cut 345,000 jobs. Some economists project the rate could near 11 percent by the middle of next year.

More encouraging was a drop in initial jobless claims to a seasonally-adjusted 601,000 last week, which was below analysts’ expectations and the lowest level since January.

New jobless claims are a measure of the pace of layoffs and are seen as a timely, if volatile, indicator of the economy’s health. The huge increase in the unemployment benefit rolls is a sign that even as layoffs slow, companies remain reluctant to hire.

The weak job market, along with dwindling home values and falling stock portfolios, likely will restrain consumer spending for months, economists said.

That’s a big reason why many analysts and the Federal Reserve expect any economic recovery later this year to be slow.

Consumer spending powers about 70 percent of the economy and has been key to past recoveries. When Americans sharply reversed their free-spending ways last year, the economy plunged into a steep recession, which is now the longest since World War II.

The Fed said Thursday that American households lost $1.33 trillion, or 2.6 percent, of their wealth in the first three months of the year. That caused household net worth to drop to the lowest level since the third quarter of 2004.

Tim Groves, a 39-year-old attorney in Providence, R.I., said his family’s spending has increased slightly from a few months ago but only because his wife did not lose some classes she teaches as they had feared.

“We’ve loosened up but that doesn’t necessarily mean we’re spending more,” Groves said. “We were cutting back a fair amount just preparing for that. We’re trying to keep the belt tight.”

Retail sales did rise 0.5 percent in May, the government said, the first increase in three months. But excluding autos, gas and other volatile categories, so-called “core” retail sales were flat compared with April.

Higher gas prices likely will restrain consumer spending in the next few months, said Paul Dales, U.S. economist at Capital Economics in Toronto. He estimates gas prices rose 10 percent in May and have jumped another 15 percent so far this month.

Still, Wall Street welcomed the drop in new jobless claims and growth in retail sales. The Dow Jones industrial average added nearly 32 points to 8,770.92, and broader indices also rose.

Many analysts expect layoffs to worsen the housing slump, as unemployment, rather than risky mortgages, becomes the main reason borrowers default on their loans. That will likely keep foreclosures elevated into 2010.

Foreclosure filings fell 6 percent in May from April, RealtyTrac Inc. said Thursday. More than 321,000 households received at least one foreclosure-related notice last month, 18 percent more than a year earlier.

Despite the drop from April, it was the third-highest monthly rate since the Irvine, Calif.-based foreclosure listing firm began its report in January 2005.

Also Thursday, the Commerce Department said businesses cut inventories 1.1 percent in April as they struggle to get stockpiles more in line with falling sales. Inventories have fallen for eight straight months, the longest stretch since there were 15 consecutive declines in 2001-2002, a period that covered the last recession. For further information, visit: http://www.google.com/hostednews/ap/article/ALeqM5gNiyJ905Ho0Ur96V2TQhsBX19lGwD98OMFS81


Expected Worse For June

June 5, 2009

Even when shoppers showed up, they didn’t spend, making May another bruising month for many retailers, including Target Corp.

Target’s same-store sales fell 6.1 percent, a bigger drop than the 4.3 percent analysts expected. Overall, necessities like food and health care products continued to be the strongest sellers. Sales of apparel and home products continued to be weak. In April, Target had a tiny sales increase, its first in months.

Minneapolis-based Target has adjusted by shifting its focus from fashion to necessities. The company also has been cutting costs — including job reductions at its headquarters — as well as seeking deals from suppliers.

Customers may notice. “You also have less labor in the stores, especially labor that would have customer contact,” said George Rosenbaum, chairman of Chicago consumer research firm Leo J. Shapiro & Associates.

That said, Target’s much-larger rival, Wal-Mart Stores Inc., didn’t report results for last month, making conclusions about the broader retail sector more difficult. The world’s largest retailer, Wal-Mart sales have tended to boost the sector during the recession.

According to a preliminary tally of U.S. retailers by Goldman Sachs and the International Council of Shopping Centers, same-store sales fell nationwide 4.6 percent, worse than the 3 percent predicted.

Same-store sales, or sales at stores open at least a year, are a key indicator of retail performance because they factor out sales at newly opened stores. Economists closely monitor consumer spending, because it accounts for about 70 percent of U.S. economic activity.

Department store chain Kohl’s Corp., based in Menomonee Falls, Wis., on Thursday reported stronger than expected sales for May, with comparable-store sales down 0.4 percent. Analysts reporting to Thomson Reuters had expected Kohl’s sales to drop 3.8 percent.

Meanwhile, luxury chains and larger department store operators continued to be the weakest sectors, with teen apparel mall retailers such as the Buckle Inc. stronger. Warehouse club chain Costco Wholesale experienced a sales dip, and so did department store chain Macy’s.

“There’s general softness across the board, as consumers continue to face rising unemployment, falling home values and rising gas prices,” said Ken Perkins, president of retail consulting firm Retail Metrics LLC. He expected same-store sales to fall 3.6 percent overall.

Britt Beemer, chairman of America’s Research Group, a consumer-research firm in Charleston, S.C., said he was shocked at how weakly retailers performed given that his data showed 5 percent more shoppers were at stores during the Memorial Day weekend than a year earlier.

He noted that shoppers only appear to be making sale purchases and buying items on their lists.

“June,” he said, “is going to be a retail train wreck.”

For more information, visit: http://www.tradingmarkets.com/.site/news/Stock%20News/2362990/


Retailers Exceeding Expections Because Expectations Were Low

May 28, 2009

Several apparel makers and retailers, including Polo Ralph Lauren, posted better-than-expected quarterly results Wednesday, helped by tight management of expenses and inventories.

American Eagle Outfitters, which topped expectations by a penny, said it was seeing early indications of its business stabilizing.

Expectations have declined for apparel retailers and manufacturers, which are among the hardest hit sectors in the recession as consumers trim spending for items other than essentials like food.

Polo, a fashion wholesaler and retailer with upscale brands like Polo and Club Monaco, said net income tumbled to $45 million, or 44 cents a share, from $103.5 million, or $1 a share, a year earlier.

But excluding charges, Polo said it earned 86 cents a share, soaring past analysts’ average estimate of 40 cents, according to Reuters Estimates.

Revenue in the period, which ended March 28 and was the fourth quarter of Lauren’s fiscal year, fell 1 percent to $1.22 billion, hurt by same-store sales declines and the stronger dollar, which reduced the value of overseas sales.

Stock in Lauren, which is based in New York, declined 35 cents, to close at $54.03 a share.

American Eagle, which caters to teenagers, posted a profit of $22 million, or 11 cents a share, down from $43.9 million, or 21 cents a share, a year earlier.

Excluding one-time items, profit was 8 cents a share, better than the 7 cents a share forecast by analysts.

Sales in the period, which ended May 2 and was the first quarter of American Eagle’s fiscal year, fell 4 percent, to $612 million.

Stock in American Eagle, which is based in Pittsburgh, fell 15 cents, to close at $14.33 a share.

For further information, visit: http://www.nytimes.com/2009/05/28/business/28retail.html


Surveyed: The Least Affected By the Downturn

May 28, 2009

A shopper profile report issued by mall media operator EYE and Arbitron, which identified three shopper segments — carefree, power and value — found that the 18- to 24-year-old carefree shopper has been least affected by the downturn.

According to the study, just half of the segment has jobs but is supplemented financially by parents. That additional support and a relative lack of obligations allow them to spend around $500 each month at EYE malls, which encompass over 3,500 panels in 250 shopping malls across the country.

Power shoppers skew female, tend to be between the ages of 25 and 44, and are more likely to have children in the household. The power mom shops for the entire family, visits more stores per mall visit and spends over $9,000 per year in EYE malls.

The value shopper specifically looks for sales while shopping and is twice as likely to buy items on sale as other shoppers. Even with these sale strategies, the value shopper spends nearly 25% more than the average shopper as they are triggered to spend more than they intended when they see good value in an offering.

Almost three-quarters of value shoppers are female and are likely to be between the ages of 25 and 44.

“The Adult Shopper Profile is a key measure of consumer spending and engagement with advertising,” said Alton Adams, CMO of Arbitron. “Advertisers can better target shoppers near the point of purchase by including these profiles in their place-based advertising decisions.” For further information, visit: http://www.chainstoreage.com/story.aspx?id=105469&menuid=443