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Economy backtracks after strong holiday season

Diane Swonk Jan 12, 2012

Jeremy Hobson: The government said this morning that retail sales inched up 0.1 percent last month, which was enough to make 2011 the best year ever for retail sales. But the government also said the number of people seeking jobless benefits ticked up last week to 399,000 — that’s the most in six weeks.

And let’s get reaction now from our regular Thursday guest — Diane Swonk, chief economist with Mesirow Financial. She’s with us live as always from Chicago. Good morning, Diane.

Diane Swonk: Good morning.

Hobson: So what’s the deal here with these retail sales figures — best year ever?

Swonk: Well they certainly were the best on volume, and we did see them tick up a bit. But of course, they didn’t tick up more because it was all done on discount. Consumers were continuing to shop the sales and look for the best deals they could get.

We also saw a lot of margin compression, where people had to offer sales at the high-end luxury retailers, because some of those Wall Street bonuses weren’t as good as people had hoped for this year.

Hobson: And as we look to 2012 for retail sales — I mean, I was driving by the mall the other day; it looked pretty empty. What do you think?

Swonk: You know, January is the time when we tend to see some give back, although gift cards had extended the retail season. And now people are using the week after Christmas to really shop and get those sales and deals. And I think it’s going to be a very tough, uphill battle as we move into this year — especially with the layoffs that followed this retail season.

We saw in the first week of January, layoffs increased quite a bit, particularly in the retail sector, and all those couriers and messengers. This was a big corporate retail Christmas. Corporations were willing to do a temporary thing and send out their gifts and deliver them, but that’s not sustainable.

Hobson: Is that why we’re seeing this tick up in the people seeking jobless benefits?

Swonk: Absolutely. We saw it almost all in the private sector — in fact, we’ve still got many of those postal workers to come, and the veterans started to abate in the numbers. But we are starting to see retailers, and in particular couriers and messengers, can’t maintain the kind of sales force they thought they would during the holiday season.

Hobson: Diane Swonk, chief economist with Mesirow Financial, thanks as always.

Swonk: Thank you.

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