Retailers still reeling from the Thanksgiving weekend sales have turned in their numbers and the picture is very interesting. In short, between Black Friday and Cyber Monday, this past weekend was the most successful four days for retail ever. What does this say about our society? It says it’s shopping season! More importantly, what do these results say about our economy? Over the years, Black Friday, and now increasingly Cyber Monday, have become major economic indicators. They are bellwethers. If Black Friday goes well the market celebrates and stock prices rise.
Black Friday and Cyber Monday
If it goes badly, investors get jittery and the market suffers. This year, Black Friday alone—without including a penny in the total from Cyber Monday—juiced retailers balance sheets by $11.4 billion, while Cyber Monday shattered records and expectations, netting online retailers over one billion dollars. The buying frenzy was not just limited to videogames and mohair coats.
NASA is dead, but stocks took off like rockets this after last weekend. The NY Daily News has some of the impressive numbers:
All three major indexes were up about 3%, with the Dow Jones jumping 291 points, or 2.6%, to 11,523.
The Standard & Poor 500 halted a seven-day skid, finishing up 2.9%, and the Nasdaq composite increased by 3.5%.
The gains come after the worst stock market performance over Thanksgiving week since the Great Depression.
So the numbers look solid, but inquisitive minds want to know: is this an indication of a rebounding economy or are the 1% spending more vigorously?
Actually, whereas the Dow Jones Industrial used to mirror the economy quite well, at this stage of our economic evolution, Black Friday may be a better indicator of where we are economically. Spending after Thanksgiving building up to the Christmas season is an index of how the massets are feeling about the economy—if they’re spending, they feel good. If they’re keeping the Visa card in their wallet, they feel bad about the economy and are not likely to spend—a bad sign for the economically crucial retail sector.
The amount of shoppers busting down doors has become a metric for how well the money is flowing in America and despite the dour economic landscape playing out all around them, shoppers came out ready to shatter records in spending and activity that were set in America’s “good years”. So what does it all mean?
At the core, people are spending more. Whether the sales were made on credit or with real money remains a mystery to most. But also, markets have become more efficient. Cyber-Monday, email marketing, and various data allowing retailers to gauge their demographics has made ‘supply’ much better at gauging the level of ‘demand.’ Coupons—both online and off—are printed and distributed more effectively, landing in the inboxes of people who are actually likely to use them, rather than appearing in the profusion of the Sunday Paper catalog.
Another important question that we may not see an answer to is who these shoppers are. I suggested earlier that the 1% is driving the economy with their voracious purchasing, but the truth is closer to the reason these sales happen in the first place.
We all know the world is in crisis. Europe is been dangling on the brink of collapse. Businesses are spending less. Many Americans are earning less than ever. But Christmas is a time to forget all that; to engage in some holiday cheer and be with family through the bitterest season. The Thanksgiving sales weekend is, at its core, a portal for those who can’t afford as many gifts as they could before to secure future-presents, but also basic living goods at a deep discount. The jump in spending may be misleading as a portent of a convalescing economy, due to the nature of the spending. If there is little to no growth in the retail market all year and then 24 million people go all out to secure the best deals of the year, that could be the sign of a desperate population eager to purchase goods at prices they can afford (read: 50-90% off).
Online and physical retailers may have had a massive payday, but unless that revenue is turned toward building business, hiring workers and uplift then it’s very unlikely that we will see any kind of economic ease as a result of this record-breaking sales weekend.