report<\/a> about job creation was practically anemic. <\/p>\nFor the first time in four years, there are now just about as many people looking for jobs as there job openings. And if the current trend continues, there will soon be more people looking than jobs available. <\/p>\n
Historically, unemployment has weighed heavily on consumer spending. It\u2019s not just the people who are unemployed that cut back. The most meaningful reduction in consumer spending that happens when unemployment increases comes from people who know unemployed people among their friends, neighbors and coworkers, Seeing unemployment among other people makes people say, \u201cthat could happen to me.\u201d <\/p>\n
The Fed Normally Acts<\/p>\n
When unemployment rises, the Federal Reserve often cuts interest rates. Right now there\u2019s a lot of political pressure on the Fed to do exactly that and with the anemic employment growth, there\u2019s justification. <\/p>\n
But there\u2019s a problem. The Federal Reserve has two goals, one is to maximize employment. But the other is to keep prices stable, generally defined as maintaining inflation at or below 2% per year. <\/p>\n
The problem is that the tariffs imposed this year have increased costs on imported products by anywhere from $60 billion to $160 billion and they\u2019ve only been in effect for a few months. <\/p>\n
While manufacturers, brands and retailers are trying to hold the line on those increased costs, every brand owner and retailer I talk to has said that imported products arriving in the third and fourth quarters will have price increases of anywhere from 3-6%. That\u2019s not the entire tariff amount, retailers and brands and manufacturers are also absorbing those costs. <\/p>\n
They can\u2019t pay the whole amount themselves, part of it has to be passed on to consumers. That stimulates inflation and lowering interest rates in the face of rising prices will accelerate the price increases and that runs against the Fed\u2019s twin goals. <\/p>\n
So it leaves the Federal Reserve in the worst possible position. It can\u2019t use its tools to stimulate employment if that stimulation will raise inflation when there is already upward price pressure in the economy. <\/p>\n
The word that\u2019s used for that conundrum is \u201cstagflation.\u201d It means a stagnant economy with inflation. It\u2019s not what we\u2019re facing but there\u2019s a risk that we might be.<\/p>\n
What It Means For Retailers<\/p>\n
Stagflation makes consumers hesitant to spend. And that puts the all-important fourth quarter forecast at risk. <\/p>\n
The National Retail Federation forecasts growth in holiday sales this year of 2.5%-3.5%. Deloitte is forecasting 3.1% growth. Marshall Cohen, chief retail advisor at Circana, is forecasting anywhere from 0%-2.5% growth. <\/p>\n
None of those forecasts are for growth greater than what inflation has been for the last year which means that the real growth in the forecasts, after discounting for inflation, is zero or less.<\/p>\n
But now those forecasts are optimistic. If employment numbers don\u2019t get better fast, growth this year will be negative in real terms after accounting for inflation. <\/p>\n
You\u2019d think that would mean more holiday discounts for consumers as retailers have to unload inventory that doesn\u2019t get sold at full price. <\/p>\n
But all the retailers and brands I\u2019ve talked to have said that retail orders have been lean this year based on concerns about the economy and the risk of having unsold inventory. <\/p>\n
So There You Have It<\/p>\n
Higher inflation. Fewer available jobs. Reluctant consumers. We don\u2019t know all that is what\u2019s coming but the indications are not good. <\/p>\n
It\u2019s not a disaster, but it\u2019s not a good path. And a lot could change. If tariffs are finally determined to be illegal, that would help a lot on the inflation front but a decision about that is unlikely before mid-2026 unless the Supreme Court expedites their decision and announcement. <\/p>\n
We are living in a volatile economic environment. If that changes and it becomes more stable and predictable, the economy can improve. If it doesn\u2019t change, hang on. <\/p>\n","protected":false},"excerpt":{"rendered":"Retail activity is threatened when job creation stalls (Photo by Bob Riha, Jr.\/Getty Images) Getty Images According to…\n","protected":false},"author":2,"featured_media":48829,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[174],"tags":[79,179,18,19,185,17,2297],"class_list":{"0":"post-48828","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-eire","11":"tag-ie","12":"tag-inflation","13":"tag-ireland","14":"tag-unemployment"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/48828","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=48828"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/48828\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/48829"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=48828"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=48828"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=48828"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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