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Retail Sales Flat in December Amid Continued High Unemployment

Retail sales were flat in December as job insecurity continues to subdue consumer activity. Gains over December 2008 though seen as a positive sign.

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ARLINGTON, Va. — Retail sales were flat in December as job insecurity continues to subdue consumer activity. Entering 2010, the weak job market facing American families and the uncertain regulatory and tax climate facing businesses, are major inhibitors to a meaningful economic recovery, said the Retail Industry Leaders Association (RILA).

December’s retail sales dip follows last week’s troubling news that U.S. economy shed 85,000 jobs in December.

Excluding auto sales, retail sales dropped 0.2 percent from November, but were up 5.2 percent from a year ago, according to the U.S. Department of Commerce. Total retail sales are up by 3.1 percent since July 2009 when the overall economy began to stabilize, but still down 6.3 percent from December 2007 at the start of the economic downturn. Data on retail sales in November were revised up substantially to a gain of 1.8 percent; the 0.5 percentage point markup in the November figures more than offsets the decline in December retail sales.

“For more than a year and a half, RILA members have moved effectively to adapt to economic realities, offering product assortments at value prices to meet the demands of consumers,” said RILA President Sandy Kennedy. “Retailers that have done this effectively are best positioned to capitalize when the economy rebounds.”

Although today’s retail data were subdued and last Friday’s employment release showed that the job market has not yet turned upward, a broad view of the data suggests that the U.S. economy is stabilizing and turning toward recovery. Family incomes and spending are still up from fall 2008 during the worst of the financial crisis, and orders for business investment goods have moved higher in recent months (excluding volatile orders for the transportation sector). Forward-looking surveys of purchasing managers point to expansion in both services and manufacturing, and the drawdown in inventories has slowed considerably. The U.S. economy looks to have expanded at a brisk pace in the last quarter of 2009 and, notwithstanding the weak job market and subdued retails sales, is set for further expansion in the first three months of 2009.

“Today’s retail sales data show that consumers are still waiting for an improved job market before they start spending,” said Phillip Swagel, visiting professor at Georgetown University’s McDonough School of Business and RILA outside economist. “Even with much better results for November, the downtick in December retail sales reflects the continued lack of confidence among American families in the strength of the economic recovery.”

“Without job creation, the pathway to a robust recovery remains uncertain,” added Kennedy. “Retail businesses across America are looking to Congress for relief and a degree of predictability so they can focus long term on adding jobs and growing their businesses,” continued Kennedy.

In particular, RILA has called on Congress to reform excessive interchange “swipe” fees charged by credit card companies on purchases made with credit and debit cards. These fees, which totaled $48 billion in 2008 and are particularly harmful to small retailers, have risen by 300 percent since 2001.

RILA also expressed opposition recently to health care reform legislation currently under consideration in Congress. Despite months of engagement on the issue, RILA expressed disappointment that the legislation that emerged from the House and Senate would undermine the quality and affordability of health care insurance RILA members offer their employees and stifle retail job growth for years to come.

RILA is the trade association of the world’s largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad.

Phillip L. Swagel is a visiting professor at the McDonough School of Business at Georgetown University, where he teaches classes on financial markets and directs the Center for Financial Institutions, Policy, and Governance. He is also a non-resident scholar at the American Enterprise Institute.

Dr. Swagel was Assistant Secretary for Economic Policy at the Treasury Department from December 2006 to January 2009. He has previously taught at the University of Chicago, Booth School of Business and at Northwestern University, and held positions at the President’s Council of Economic Advisers, the International Monetary Fund, and the Federal Reserve.