AMES, Iowa -- Some economic forecasts -- including those by Target and the National Retail Federation -- have projected modest increases in holiday sales this year as the nation's sluggish economy shows signs of recovery. But Iowa State University economist Liesl Eathington says all the attention on holiday retail sales misses a more important economic point.
Using recent indicators for Iowa's economy, Eathington reports many households across the state still won't have a lot of discretionary income to spend this holiday season. She posted her complete "2010 Holiday Retail Sales Outlook."
"Many people will be watching the 2010 holiday shopping season as an indication of consumer confidence and the economic well-being of Iowa's households," said Eathington, director of ISU's Regional Economics and Community Analysis Program (RECAP), who serves on the Governor's Council of Economic Advisors. "Although it's tempting to use the strength or weakness of holiday retail sales as a barometer for our economic recovery, we don't need to wait for the retailers to tell us how we're doing. In fact, many indicators suggest that we should be more concerned about the longer term well-being of Iowa's households and less concerned about how much they spend during the next two months."
Eathington says these facts provide reason for caution:
- Recent poverty estimates suggest that nearly 20 percent of Iowa's children under age six were living in poverty in 2009.
- More than 52,000 Iowa households received food assistance payments in October, which was nearly 10 percent more than last year at this time.
- In just the last three months, foreclosure proceedings were initiated on more than 2,000 homes, about 15 percent more than the same period last year.
- Iowa has had more than 8,300 filings for Chapter 7 or Chapter 13 bankruptcy since January.
"Retailers can probably rule out a quarter million of Iowa's households as a significant source of holiday spending and may wish to focus their efforts on wealthy households," Eathington said.
She says when the state's 1,227,000 households are ranked by household income:
- The bottom 20 percent of households accounted for only 4 percent of total income received by Iowa's households in 2009. Their average household income last year was $12,224.
- Nearly half of Iowa's total household income was accumulated by the top 20 percent of households in 2009.
- The top 5 percent of Iowa's households capture 20 percent of total household income, although even this group has felt the effects of the recession. Their average household income in 2009 was down 1.3 percent compared to 2008.
Unemployment, underemployment and lingering concerns about job security may continue to dampen the spending impulses of Iowa's consumers this year, according to Eathington. These are the facts:
- The ranks of the unemployed in Iowa have swelled by nearly 7,000 this year compared to last.
- Iowa had 113,300 unemployed residents in September 2010, representing 6.8 percent of the state's labor force compared to 6.4 percent last year.
- An average of 3 percent of Iowa's labor force has been unemployed 15 weeks or longer during the last four quarters, up from 2 percent during the previous year.
- Including the number of discouraged workers and underemployed workers in the measure of unemployment, nearly 12 percent of the state's potential workforce is being under-utilized.
"If 2009 is any guide, we probably shouldn't look to the retail sector as a significant job creator during this year's holiday shopping season," Eathington said. "Typically, the retail sector boosts its hiring activity in October and November and retail employment peaks during the months of November and December. Last year, new hires during the holiday shopping season were about 25 percent below the average for the previous four years. Thus far in 2010, levels of new hiring activity in the U.S. retail sector have been looking only slightly better than 2009."
Eathington reports that Iowa's total retail employment so
far in 2010 has been running about 4 percent behind
pre-recession levels.
