Great news: retail may be entering a 500-day recession

A retail recession wouldn’t exactly qualify as unexpected, given today’s numbers on durable-goods orders and inventories, but Burt Flickinger says it’s just the beginning.  CNBC quotes the analyst as predicting a retail recession that will last through the end of next year, thanks to high unemployment and a confidence crisis in the economy, as well as an end to extended jobless benefits:

Burt Flickinger, managing director of retail consultantcy Strategic Resource Group, said the US has just entered a 500-day retail recession, and before it’s over, the US will see weaker retail sales, more store closures andeven additional retailers joining Borders in bankruptcy.

Helping to drive the trend is a weak labor market, Flickinger said.

Job growth has remained elusive, pushing the unemployment rate to 9.2 percent. Flickinger also expects more people will be joining the ranks of the unemployed as state and local governments make further cuts to their budgets.

The latest consumer confidence report from the Conference Board showed consumer attitudes perked up from the prior month, but it also captured growing fears about jobs. Those fears are likely to curtail spending, especially when you consider the large numbers of households that are living paycheck to paycheck.

Flickinger also notes that the end of extended jobless benefits will take $37 billion out of the economy, but we’ve dealt with that argument before.  That $37 billion in benefits came out of the economy in one way or another, either now or later — and later will be with interest.  (In fact, since we’re borrowing to pay bills anyway, even taking that money directly from incoming revenue would still carry an interest cost.)  Jobless benefits don’t create wealth; wealth just gets transferred, and there’s nothing that shows that the transfer boosts actual overall spending.  There are good policy arguments for jobless benefits, but economic expansion isn’t one of them.

Rasmussen’s latest figures on consumer confidence back Flickinger’s hypothesis, at least in the short run:

Consumer confidence has fallen to a new two-year low while investor confidence continues to hover just above the lowest levels of 2011.

The Rasmussen Consumer Index, which measures the economic confidence of consumers on a daily basis, fell four points on Wednesday to 63.7.  That’s down eight points from a week ago, down nine from a month ago and down ten from three months ago.  Confidence is now just nine points above the post-9/11 low reached in March 2009.

Just 15% of the nation’s adults believe the U.S. economy is getting better these days, while 66% believe it’s getting worse.  Those numbers reflect a far more pessimistic outlook than was found at the beginning of the year. The first update in 2011 showed that 30% believed the economy was better and 45% thought the opposite.

The Conference Board’s Consumer Index shows a slight movement in the other direction for June, but still near its seven-month low in May:

As their short-term outlook on jobs and income eased somewhat amid a mix of optimistic and bad economic news, U.S. consumers’ confidence rose slightly to 59.5 in July, according to a survey released Tuesday by a private research group.

That’s up from a revised 57.6 in June – which marked a seven-month low in the measure – but still well below the reading of 90 that signals a healthy economy on the Conference Board’s Consumer Confidence Index. It hasn’t approached that level since the recession began in December 2007.  …

Earlier in the year on the index, which measures how Americans feel about business conditions, the job market and the next six months, Americans were more optimistic that the economy was on track for a recovery. But consumer confidence has fallen since reaching a three-year high in February of 72. A shift of less than five points is generally discarded by economists as insignificant.

Rasmussen’s index is a daily tracking poll, which means they are surveying somewhat more recently.  Neither gives any indication that American consumers are itching to spend money, and both show consumers approaching the economy as a recession rather than a recovery.  With unemployment increasing and housing sales bumping along the bottom, it’s no small wonder that Flickinger sees a long period of decline in the consumer economy ahead.

If that comes to pass, it’s hard to imagine Barack Obama building any momentum for a second term in office.  A long-lasting retail recession would essentially be a vote of no confidence in Obamanomics, and the handling of the debt-ceiling crisis hasn’t exactly bolstered trust in the White House either.  But it would also make it more difficult to turn the economy around regardless of who gets elected President in 2012, as investors and capital will be hard to find after than long on the American sidelines.