Retail sales (ex autos) declined 0.6% in July relative to June. The decline was 8.5% on a year-over-year basis. This disappointment was all the more significant in that it came at the start of the important back-to-school shopping season (mid-July to mid-September). Back-to-school accounts for approximately 20% of retail sales for the year and businesses use it as a barometer for upcoming Christmas sales. Indeed, retailers often shift their order mixes and levels dramatically based on what happens during the back-to-school season.
Consumer surveys suggest that shoppers this year are limiting “back-to-school” to simply that – paper and pens. Usually the season brings enhanced sales across-the-board, as parents buy clothes not only for the kids, but also themselves.
August retail sales numbers won’t be released until September 15th, but comments from business owners suggest sales are still slow. The category known by the oxymoron “teen fashion” is particularly slow. And there’s a simple reason for that – young people did not find jobs this summer.
Yesterday, the government reported that the youth (16 to 24-year olds) unemployment rate hit 18.5%, its highest level since 1948. And, the youth unemployment rate is tempered even more than the overall unemployment rate by the non-counting of discouraged workers who have left the labor force. In July, the employment-population ratio for people between 16 and 24-years old was 51.4%, its lowest level ever. This ratio has fallen by nearly 18 percentage points since its peak in July 1989.
The inability of the young to find jobs this summer explains a small portion of the increase in the savings rate (typically the young quickly spend the money they earn in the summer), the plight of teen retailers, and – closer to home – the lower level (and more downscale) used vehicle purchases accounted for by the young. This summer of discontent for many of today’s youth will also likely influence their savings and spending patterns in the years ahead.