Why Brisk Sales Will Make Holiday Hangover Worse


I miss the days when dangerous and unsightly Black Friday stampedes got blamed on our market-maddened society's misplaced priorities. Now even the police have gotten into the act of attributing Black Friday mischief to the "tough economy," which doesn't make a lot of sense: What kind of recession is it where money troubles drive people to shop more aggressively? 

As I point out in Reason's December issue, believers in economic stimulus need to explain how you can have private spending higher than its pre-recession level and still claim the economy is suffering from an insufficient level of demand. If our demand-side collapse has now been re-inflated – and spending figures indicated it had been long before this Festivus season got underway – then why do we need Paul Krugman's invasion by space aliens to cure the recession? 

This holiday weekend's good news for retailers just sharpens the point. By most accounts, the post-Thanksgiving shopping rush looks like a success (never mind that they were saying pretty much the same thing last year). Forbes, citing the National Retail Federation, says the number of Black Friday shoppers was up 6.6 percent above last year's statistic. In fact, shoppers have been so enthusiastic that 25 percent of the 226 million Americans in stores this weekend actually jumped the gun, and began their shopping on Thanksgiving day itself. Stores with early hours like Wal-Mart and Target sold out the bulk of their wares before Friday. 

A nation has to dig deep to spend like that, and sure enough, the Bureau of Economic Analysis shows that the personal savings rate has plummeted in recent months. From June 2010 through June 2011, personal savings – disposable personal income less personal outlays – stayed between 5 and 6 percent. Since then the savings rate has dropped steadily and in October clocked in at an anemic 3.5 percent of personal income. These data are always subject to revision – so note that when the savings rate was this low during the Bush Administration, popular opinion held that the national savings rate was actually negative. 

Another important piece of pro-spending propaganda holds that ever since the internet changed everything, online shopping has been driving retail. This claim is belied by Census Bureau data [pdf] on e-commerce, which show that online sales still make up less than 5 percent of U.S. retail. But I seem to be the only person who notices what a humble share that is. Everywhere else, I see enthusiastic headlines like "Big Cyber Monday expected to follow strong Black Friday" in ComputerWorld

"Despite some analysts' predictions that the flurry of brick-and-mortar retailers opening their doors early for Black Friday would pull dollars from online retail, we still saw a banner day for e-commerce with more than $800 million in spending," said comScore chairman Gian Fulgoni, in a statement. "With brick-and-mortar retail also reporting strong gains on Black Friday, it's clear that the heavy promotional activity had a positive impact on both channels."

ComScore, an online traffic tracker, noted that Black Friday brought in $816 million in U.S. online sales, making it the heaviest online spending day to date this year. Friday's online sales revenues represented a 26% spending increase compared to the same day last year.

Huzzah to anybody who can sell product and make payroll in these troubled times. But at what point will Keynesian interventionists admit that the problem they understand (the decline in spirited animal spending) has been solved and the problem they don't understand (levels of indebtedness that have rarely been seen in our nation's history) is out of control? 

In retrospect, I feel I may have been too harsh on the Affluenza guys back when the recession was still officially on. These folks spent decades bewailing what TV punk rockers used to call "the whole sick society" that caused people to lay waste their fortunes with McMansion-sized yachts and yacht-sized SUVs. But then when they got a real economic collapse, none of the Live Simplers were happy about it. 

At the time I thought that showed bad faith, but maybe the Live Simplers were right to warn that even broke Americans – even in an era when being broke has a kind of cachet – would still end up spending themselves into stupors.  In Keynesian terms, a Christmas rush is uncomplicated good news. And yet unemployment is above 9 percent, nobody wants American land anymore, and the United States even appears to have lost its luster as a destination for immigrants. It turns out priming the pump doesn't work when the engine is busted.