Retail Observer

RETAILOBSERVER.COM NOVEMBER 2015 38 I s it good news or bad news? The Federal Reserve Chairman, Janet Yellen, announced that the Fed was going to delay raising interest rates this quarter due to weakness in the global economy, low inflationary pressures and instability in financial markets. By not making a nominal move this quarter of 25 basis points they have guaranteed uncertainty in equity markets around the world. Many Economists believed that this was the right time to hike rates as the U.S. Economic data has improved to a point where 2% inflation would be a real possibility if it weren't for the collapse of oil prices. Let's look at the data. The ADP National Employment Report for August reported that private payrolls increased by 173,000 jobs. While this was below expectations anticipated by Economists, employment remains strong and broad-based, with the exception of the energy industry, which continues to lose jobs as the declining price of a barrel of oil has not abated. The unemployment rate dropped to a near 7-1/2- year low at 5.1% which the Federal Reserve considers full employment and wages accelerated. This is the lowest rate for unemployment since April of 2008. Also reported in August was a 0.3% increase in hourly earnings this is now 2.2% above their 2014 level but still well below the 3.5 percent growth rate economists consider healthy. Another very positive sign for our economy was reported by the Commerce Department in late August when they revised second- quarter Gross Domestic Product to show GDP expanding at a 3.7% annual pace instead of the 2.3% rate it had initially estimated. Keep in mind that GDP since 1948 has grown an average of 3.2% a year, this past quarter's increase is clearly impressive. Some of this growth came from sales of automobiles, which are now on pace to sell 17 million cars in 2015 and from housing that from recent data annualizes sales at 1.2 million living units. In my convention presentations I often talk about the importance of U.S. Consumer Confidence and how in the last seven years it has increased dramatically. Over the past twelve months of 2015, consumers have slowly been feeling more positive about our economic progress, unfortunately the August number dropped to the lowest level we have seen since last September. Consumers were likely concerned about the recent stock market correction, the reports of a global recession and worries over China's slowing economy. Economists believe that with a the stock market decline looking more like a correction rather than a new bear market and China reacting to their economic slowdown with stimulus, that Consumer Confidence should bounce back in October. The good news for consumers has been the recent decline in gas prices now averaging $2.33 nationally. According to Goldman Saks, "The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016 on further OPEC production growth." In its worst case scenario, Goldman Saks is predicting oil as low as $20 a barrel if the glut exceeds storage capacity. This will give consumers additional spending money but it could also be an indicator of a global slowdown. In times like these I am reminded of the words of Charles Dickens in the Tale of Two Cites, "It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us." We are at an economic crossroads, some people see the light and others the darkness. THE FED DELAYS AN INTEREST RATE HIKE, UNCERTAINTY TO RULE THE MARKETS Joe Higgins Economic Viewpoint Joe Higgins began his career with General Electric with a degree in economics. Joe left GE and joined Whirlpool as National Director of Sales. Joe retired from Whirlpool in 2012 in a career that spanned two companies and 43 years in the appliance industry. For the past two years, Joe has been speaking at conventions, seminars and sales meetings across America. His work includes presentations on the United States economy, leadership, creating a high perform- ance culture, healthy teams, and customer service. Visit www.q4qwithjoe.com. RO

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