U.S. holiday sales seen rising most since 2011 on job gains

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(Oct 7): U.S. retail sales this holiday season may rise the most three years as the improving employment picture gives more shoppers the means to splurge on gifts, the National Retail Federation said.

Purchases may advance 4.1 percent to $617 billion in November and December, the Washington-based NRF said today in a statement. The increase would top last year’s 3.1 percent gain and the 10-year average of 2.9 percent, the trade group said.

Steady employment gains are giving more consumers the wherewithal to buy presents this year and helping others feel secure enough in their jobs to spend more. Even so, stagnant wage growth has kept many shoppers reliant on markdowns and may prompt retailers to offer steep discounts, just like they did last year, when a government shutdown and extreme weather kept some consumers at home.

“The ability for consumers to spend is there,” Jack Kleinhenz, chief economist at the NRF, said in an interview. “Retailers have conditioned consumers into looking for bargains. There are a lot of concerns out there, but putting those aside, if we don’t have any unusual factors like last year, it’s going to be a solid year.”

Online sales may rise as much as 11 percent to $105 billion in November and December, the NRF’s shop.org arm projected. That would be greater than the 8.6 percent sales growth last year.

Some consumers are starting early to get the best prices. Gena Shelton, a 34-year-old mother of one who lives in Columbus, Ohio, said she’s almost a third of the way through her holiday shopping list already. Shelton bought a new house with her husband in May and said she plans to keep her gift budget the same or smaller than last year.

Shopping Ahead

“The reason I’m shopping more ahead than I normally do is that I would like to spend less,” said Shelton, who looks for coupons and savings codes online to stretch her dollars. “They don’t know if you bought that Disney princess 70 percent off or for full price.”

Consumer spending, which accounts for almost 70 percent of the U.S. economy, has been seesawing in recent months as Americans grapple with sluggish wage growth. After adjusting for inflation, purchases climbed 0.5 percent in August, the biggest gain in five months, according to figures from the Commerce Department. That followed a 0.1 percent drop the prior month.

Big-ticket items such as automobiles have led the gains as low interest rates and discounts prompt households to replace older models. Cars and light trucks sold at an average 16.7 million annualized rate from July through September, the best performance for any quarter since the first three months of 2006, according to industry data.

Uneven Progress

While spending is climbing, uneven progress in the labor market is holding back a more pronounced rebound. The jobless rate fell to a six-year low of 5.9 percent in August as employers hired more workers than most economists forecast, the Labor Department reported last month.

The increase in jobs has so far failed to generate bigger pay increases as earnings per hour were little changed on average last month from August, the figures showed. Over the past 12 months, wages were up 2 percent, compared with a 3.1 percent increase in the year ended December 2007, when the last recession began.

This year’s back-to-school season, often seen as a harbinger for the holidays, was the slowest since the recession ended in 2009. Spending in the period rose 3.1 percent, missing a forecast for a 3.2 percent gain, according to research firm Customer Growth Partners LLC. Another sobering sign: Store traffic declined 4.2 percent in July and slipped an additional 4.7 percent in August, according to ShopperTrak, a Chicago-based research firm.

Deloitte Forecast

The NRF’s holiday estimate is in line with a projection from Deloitte LLP, which said last month that sales in stores may increase 4.5 percent in the period November through January. Online and mail-order sales may climb as much as 14 percent in that time, the New York-based consulting firm said. The NRF last year forecast a 3.9 percent increase in holiday sales, overshooting the final results by 0.8 percentage points.

Companies’ seasonal hiring plans also point toward a brighter spending picture. U.S.-based retailers may hire more than 800,000 temporary staff for the first time since 1999, according to Challenger, Gray & Christmas Inc., a Chicago-based consulting firm. That would top last year’s 786,200 hires.

Online Sales

Many of those jobs may not be at brick-and-mortar locations as retailers and shipping companies prepare for a continued shift to online sales this year. United Parcel Service Inc. said it would boost seasonal hiring by as much as 73 percent from its peak plan in 2013, when a surge in late e-commerce orders left the company unable to meet holiday deadlines. The temporary workforce will number as many as 95,000 people to handle the crush of packages from October through January, the Atlanta- based company said last month.

Target Corp., the Minneapolis-based discounter, expects to hire 70,000 seasonal workers to handle the holiday rush, in line with last year. Wal-Mart Stores Inc., meanwhile, plans to hire 60,000 seasonal employees, 10 percent more than in 2013.

Last year, the first partial government shutdown in 17 years spooked some customers out of spending while extreme weather and a shorter shopping season kept them out of malls when they did want to buy. Consumer spending isn’t likely to increase dramatically this year, with shoppers buying only around specific occasions like holidays, Liz Dunn, chief executive officer of retail consulting firm Talmage Advisors in New York, said in an interview.

New electronic products such as Apple Inc.’s latest iPhones and more fashion from apparel chains may rekindle self-gifting among shoppers, which would boost profits for retailers, Dunn said. The key will be for stores to control promotions, she said.

‘More Reasonable’

“Hopefully, there’s a little more reasonable tone where you can start at 30 percent off and go to 50 percent instead of starting at 50 percent and having nowhere to go but to an unprofitable markdown,” Dunn said.

Shoppers like Shelton are still looking for the best price they can find and considering creative gifts for friends and family who may not need the hottest toy.

“As you get older, you have to budget and think about things more,” she said. “Sometimes it’s not the money, it’s finding something meaningful -- we’re all guilty of having too much junk in our lives sometimes.”