An uncertain economy that has shown signs of strengths, but also weaknesses, will likely have shoppers on Black Friday wary of splurging and retailers offering deep discounts to win back consumers, according to a Chapman University economics expert.
On the one hand, the jobs market has been “very robust and very strong” with 260,000 jobs added in October, including 56,700 in California, according to Raymond Sfeir, director of the A. Gary Anderson Center for Economic Research at Chapman University, “So the labor market is very strong.”
The hourly wage rate in the private sector has registered a 4.7% year-over-year increase according to figures released in October, which is “not bad, even though it is 3% lower than the inflation rate. But, unfortunately, those wages are still declining because the inflation rate is above the rage of wages,” Sfeir told City News Service
Gas prices are also down, which will help consumers driving around looking for bargains, Sfeir said.
“But on the negative side the (Consumer Price Index) is still very high,” Sfeir said. “And the savings rate has gone down dramatically in the last few months.”
Savings saw record highs at the start of the pandemic with more people staying home and socially distancing, Sfeir said.
“We spent a huge amount of our savings in the last year and our savings are now being depleted at a very fast rate,” Sfeir said.
The draw down on savings is likely fueled by pent-up demand and higher prices, Sfeir said.
Consumer confidence is also declining as concerns rise of a recession, Sfeir said.
“The increase this shopping season will be much lower than what it was last year,” Sfeir said. “My guess is it will be less than 8%.”
The professor believes “people are going to be buying fewer items.”
One indicator is shoppers are relying more on less-expensive grocery chain generic brands over name brands, Sfeir said.
With less consumer traffic “there will be some heavy discounts,” Sfeir said.
Part of what will fuel that is backed-up inventory that resulted as shipping companies struggled to catch up with demand, Sfeir said.
“There are no ships sitting at ports of L.A. or Long Beach, and that shows the amount of orders have declined dramatically, or, otherwise, you’d still see some of those ships waiting,” Sfeir said. “They do have more inventory than they were planning to. So after Christmas you may see even more discounts.”
Sfeir predicts a “mild recession” and said the Federal Reserve has been making the right moves to cool off the economy and slow inflation.
“It will be short and mild,” Sfeir said.
Orange County may have a rougher time of it slightly as job creation has lagged the state, Sfeir said.
“Things will be a little bit worse for us than California in general,” Sfeir said.
The main shopping centers in Orange County will offer a variety of activities to entertain shoppers on Black Friday, which has traditionally been the first day of holiday shopping.
At Irvine Spectrum, shoppers will be able to enjoy chalk art installations, a giant holiday ice sculpture and musical performances from DJ Electric to the Band of Harmony.
At Fashion Island in Newport Beach, photos with Santa Claus started last Friday, and on this Black Friday many merchants are offering discounts from 10% up to 50%.
For the first time, South Coast Plaza in Costa Mesa is showing off a Louis Vuitton-designed holiday tree featuring a mix of toys like dinosaurs, surfboards, airplanes, trains, bicycles and stuffed animals. The shopping center also features Santa’s Express Train for children and a Reindeer Carousel along with photos with Santa Claus.