Walmart’s E-Mail: Is Economic Collapse Imminent?
An e-mail sent by Walmart’s vice president of finance and logistics Jerry Murray that claimed the chain’s early February sales numbers were "a total disaster" has many questioning whether the national economy is getting ready to go all Great Recession Part II on us. For those inclined to seeing the retail sky falling, I say, "It’s going to be okay (probably)."
So, to avoid being accused of being flippant, let me point to factors that retailers have told me is messing with their businesses:
- The increase in the payroll tax – Americans quickly got used to having that extra two percent in their pockets and now that the holiday is over, it’s a hit to their wallets. This is especially true for those on the lower end of the economic ladder or those that despite higher earnings still find themselves living from one paycheck to the next.
- Higher prices at the pump – Gas prices are on the rise and predictions are coming in that new records will be set. Great news for the oil companies, but really bad especially for Walmart shoppers and others who find themselves having to fill up their tanks rather than their grocery carts.
- Delayed federal tax returns – This time last year, consumers were already beginning to get checks back in the mail and spending it at retail. This year, they will have to wait a little longer and that delay is not good for a wide range of retailers.
- Congress – While the last Congress will no doubt go down in the record books for its inability to get things done, it appears as though the current class may be getting ready to give their predecessors a run for their money.
Okay, so now that the primary negatives are out there, let’s offer some perspective on each and perhaps some reason for hope.
- The payroll tax increase hurts, especially since many companies continue to reinvest profits into areas other than the salaries of rank and file workers, but consumers through bad times and good have always demonstrated the ability to adjust. The shock that the payroll tax holiday has ended will wear off sooner rather than later and consumers will make do.
- What goes up almost never goes down nearly as much as we would like, but gas prices will fall again. Much of the current pricing issues are being attributed to plant maintenance. This will end and, speaking hopefully, perhaps Washington will dial back some of the testosterone driven speeches about OPEC nations and not give speculators an excuse for driving prices up further.
- Tax return checks will be delivered to U.S. households and consumers will take that money and go shopping.
- The nation’s business leaders helped put many members of Congress into their seats. Those same companies should now remind representatives that paying the nation’s bills, finding compromise on cutting the deficit and achieving immigration reform are all needed for private enterprise to flourish.
- Wal-Mart Executives Sweat Slow February Start in E-Mails – Bloomberg News
- Payroll Tax Increase Weighs on Consumer Spending – ABC News
- Consumers Clobbered by Sky-High Gas Prices in February – U.S. News & World Report
What is your perspective on the various factors currently influencing the state of the economy? Do you expect consumer spending and retailers to rebound this year even if they have gotten off to a slow start?