ICSC Data, Jobless Claims Turn Sour Simultaneously

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If you've been reading "The Greek," you know we've been tracking two regularly reported economic indicators for signs of expected breakdown. Unfortunately, both these data points broke simultaneously over the past week, portending a massacre of a holiday shopping season... if that wasn't already plainly clear.

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We've been tracking weekly jobless claims closely for months now, and pointing toward a point we call "the fear threshold." Well, we surpassed that point of 500,000 newly jobless last week, when 516K poor souls filed for benefits. The realities and consequences of rising unemployment are of course already evident throughout the economy. Retail spending is collapsing and manufacturing and service sectors are indicating impending recession (to be later revealed current). Recall, the formal definition of recession lays out two sequential quarters of GDP contraction. The fourth quarter would provide the second, according to the National Association of Business Economists. The NABE sees a 2.6% contraction in Q4.

More Fuel for Futility

Unemployment was most recently measured up sharply, to 6.5%, and each day brings a new corporate layoff announcement. That's not to mention what appears to be the impending bankruptcy of Chrysler and significant downsizing of General Motors (NYSE: GM) and Ford (NYSE: F). In that regard, Ford smartly unloaded its stake in Mazda this week, while it still had some value. In doing so, the legendary automaker further solidified its potential to stay solvent. That's important! In case you hadn't noticed, Congress looks steadfast in its stubborn opposition to provide aid to the auto sector. Even if a bill passed, President Bush isn't expected to sign it unless he gets his Colombia free-trade pact in return.

The downsizing of the American auto industry is probably not something the NABE expected when it forecast unemployment would top out at 7.5%. Losing a major player would have repercussions across the industry, leading to layoffs at parts suppliers and dealer closures. However, companies reorganize under bankruptcy protection (just look to the airlines), so it's unclear how deep the pain will truly run. Even so, it's likely the industry will emerge leaner and short many thousands of previously employed. Therefore, 10% unemployment remains probable in our view. Imagine that, one out of every ten of your friends will need some help soon.

The Second Sign - Weekly Same-Store Sales

We've also been tracking the International Council of Shopping Centers data, and looking toward the point where year-over-year weekly same-store sales would turn negative. That scenario is not as possible a result as you might think, considering the steady growth of population and thus the economy. Well, it happened...

ICSC Sales Trends
Week Ended	Yr/Yr Growth	Wk/Wk Growth
Nov 15	-0.1%	+0.3%
Nov 8	+0.4%	-1.0%
Nov 1	+0.9%	+0.6%
Oct 25	+1.3%	+0.5%
Oct 18	+0.9%	-1.6%
Oct 11	+1.0%	+0.7%
Oct 4	+1.3%	+0.1%
Sep 27	+1.1%	-0.2%
Sep 20	+1.3%	-1.0%
Sep 13	+1.3%	-1.6%
Sep 6	+1.9%	-0.1%
Aug 30	+2.2%	+0.1%

Since the end of "back to school" season, we've been expecting and tracking the steady decline of same-store sales. We even nicknamed this period the dead-zone between back-to-school and Black Friday.

This year's Black Friday is shaping up to be the most frenzied in history, as cash strapped Americans seek to do whatever smart spending they can within a few early morning hours, all at once! Even so, this year, the best deals may be had by the procrastinators. We fully expect there to be a huge leftover stock of inventory steeply marked down on December 24th and over the weeks that follow.

With sales turning negative and unemployment spreading swiftly, shake out is already underway in retail. We've got an interesting article coming up in early December to follow up on that thought. Stay tuned for an in-depth analysis of Iran, due here tomorrow morning.


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