January '20

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8 THE SHOP JANUARY 2020 sales to have increased by 4% when 2019 numbers are finally tallied, up from 3.4% the previous year. (Core retail sales exclude the volatile auto and gasoline segments.) There's little doubt why consumers are happy: People who want jobs can get them. And that lines pockets with spending money. The unemployment rate was running at an enviable 3.7% toward the end of 2019, well below what many economists label as full employment. Employers have been consistent in their hunt for workers to fill a growing number of positions. "Monthly job growth has been more than enough to keep up with the growth in the working age population," says Koropeckyj. The good news is that economists expect the jobs picture to remain basically bright, although there will be some erosion due to growing business uncertainty. "Unemployment is expected to edge slightly higher to 3.9% by the end of 2020, due largely to a deceleration of job growth," says Koropeckyj. "We expect job growth to steadily decelerate and cease altogether in the second half of the year." MODERATING RETAIL GROWTH Slowing job growth is a reason Moody's expects retail sales increases to moderate to 2.3% in 2020. "A deceleration of job growth means fewer new people will enter the ranks of active shoppers," says Scott Hoyt, senior director of consumer economics for Moody's Analytics. "And that will exert some downward pressure on retail sales growth that may more than offset the posi- tive effect of the higher wages (and thus the greater disposable income) characteristic of a tightening labor market." A second factor leading to a modera- tion of retail sales is consumer concern about ongoing tariff battles. That's a worry retailers know well: Disruptions in manu- facturers' complex supply chains, caused by the introduction of tariffs, increase the component costs of imported goods and thus their sticker prices on retail shelves. "The top-of-mind concern for retailers is the trade war, and how much more that will end up costing them in terms of goods coming from overseas," says Hoyt. Higher costs of imported goods can only contribute to an ongoing problem: The inability of retailers to raise prices without losing sales. "Pricing power has been poor for the last four or five years," says Hoyt. "It has deteriorated for retailers in 2019 compared to the pre- vious year. Part of the cause is the strength of the dollar, which to some degree offsets the effects of tariffs by putting downward pressure on import prices. Another reason is intense competition in the retail industry and the rapid growth of online shopping. As for 2020, the best retailers can hope for is a modest improvement." Vendors would like to solve the supply chain conundrum as much as retailers, but the task is easier said than done. "Some of our companies are trying to move their supply chains out of China, but that means abandoning long-held relation- ships," says Tom Palisin, executive director of The Manufacturers' Association, a York, Pennsylvania-based regional employers' group with more than 370 member com- panies ( "Validating new sup- pliers is costly and time consuming. Smaller Retailers can count their blessings: Consumers seem largely content with the way things are working out and have been express- ing their pleasure at the nation's cash registers. Slowing job growth is a reason Moody's expects retail sales increases to moderate to 2.3% in 2020. Retail Forecast 2020

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