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Retailers look at employment report as gauge for holiday shopping season

With the possible exception of people looking for a job, no group was more thrilled with the positive employment report issued on Friday than retailers. The Labor Department reported that U.S. payrolls rose by 57,000 in September, the first increase since January.

"Friday's data acted as a major boon for bulls, who had been hoping for some time that the 'other shoe' of employment would drop to confirm the sustainability of the current economic recovery," read a statement from Standard & Poor's.

Recent reports from organizations like the Conference Board and the National Retail Federation have suggested that consumers might be tightfisted during the upcoming holiday shopping season without some sign of improvement in the job market.

"The economy and retail sales are on the rebound, but the signs suggest that it will be an uneven rebound," said Frank Badillo, senior economist at consulting firm Retail Forward. "Until consumers benefit from a pick up in the job market, sustaining the rebound depends on a lot of one-time economic drivers such as the surge in mortgage refinancing and tax breaks. The holiday season is far from a slam dunk for retailers."

But the National Retail Federation is optimistic that this will be the year that shoppers return with enthusiasm. And it couldn't happen at a better time.

"Consumers have spent the last several years on an emotional and economic rollercoaster," said Tracy Mullin, president of the NRF. "Now, Americans appear to be ready to shop and ready to spend, just in time for the biggest shopping season of the year."

The federation is forecasting that holiday retail sales this year will total $217.4 billion, an increase of 5.7 percent over the 2002 season. Last year retail sales rose a modest 2.2 percent. Unfortunately, that left a lot of retailers with excess inventory after the holidays, a situation they don't want to repeat this year.

"Manufacturers and retailers seem not to be recognizing the magnitude of the current recovery," said Anthony Liuzzo, professor of business and economics at Wilkes University. "While consumers show every sign of a willingness to spend, inventory levels remain very low. There will be few last minute discounts available, and shoppers are wise to shop early to get the best prices and largest selection."

How important is the period between Thanksgiving and Christmas to retailers? Last year holiday sales represented 22.7 percent of the entire year's retail activity.

And, things are looking up for the new kid on the retail block, the Internet. Forrester Research is forecasting that online holiday sales will total $12.2 billion this year, an increase of 42 percent over last year. Once again, many shoppers will likely opt for the convenience of shopping online.

"Widespread free shipping promotions are the primary reason that the 2002 holiday shopping season was such a good one," according to Ken Cassar, an analyst with Jupiter Research. "Online retailers may have created the expectation among consumers that free shipping and handling is now the norm, which puts a lot of pressure on retailers to run free shipping promotions into perpetuity."

If holiday spending lives up to its expectations there will be a coincidental effect of creating more new jobs, further improving the potential for the spending season.

"Retailers. Like other sectors of the economy, are proceeding cautiously when it comes to adding workers," said consultant John Challenger. "An anticipated increase in holiday sales by itself will probably not be enough to boost hiring as much as some people are probably hoping."

However, Challenger says that retailers are expected to add about 555,000 workers this year to deal with the seasonal demand. That is inline with last years hiring but well below the pre-recession levels of 655,000 hirings in 1998, 1999, and 2000.

"The economy stands poised to deliver one of the best holiday seasons of the past ten years and, most certainly, the best holiday season of the new millennium," said Carl Steidtmann, chief economist at Deloitte Research.

Chamberlin's financial analysis column appears each Monday in The Daily Transcript. Chamberlin also reports daily on stocks and local business on NBC 7/39 and on "Money In The Morning" on KOGO 600 AM.

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