August 9, 2001

Consumers Squeeze Their Wallets, and Many Retailers Feel The Pain

Last month, consumers turned to discount retailers and turned against department and specialty stores. This month, the trend became even stronger! Though they haven't stopped buying at the full-price stores altogether, consumers are bargain hunting with a passion, leaving non-discount retailers with empty stores and emptier cash registers.

That's because unemployment fears are rippling through the US. Nearly 1 million layoffs have been announced since January, according to outplacement firm Challenger, Gray, and Christmas. And the pace doesn't seem to be slowing much either. Just this week, jobless claims shot up another 33,000. So, even though the four-week moving average of jobless claims fell, this week's up-tick shows that the layoff spree is far from over.

Consumer spending fuels two-thirds of our economy, and shoppers have been one bright spot in America's otherwise dismal financial picture. When consumers stop spending, look for the economy to slide into recession.

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