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Smell the Gloom in Spring

Updated On: Apr 27, 2009

With everyone feeling the pinch, will American optimism ever come back into fashion?

I WAS at Macy’s, the venerable store in mid-town Manhattan, for a one-day sale. There, along the aisles and at the cash registers, I hoped to see if optimism might be the new thing for Spring in the United States.

A New York Times/CBS News poll earlier this month showed that 20 per cent of Americans believe the economy is getting better, up from 7 per cent in mid-January. Pessimism is on the decline, with just 34 per cent thinking things are getting worse, compared to 54 per cent at the start of the year. The stock market rallied, leading some to hope the worst may be over.

Macy’s at Herald Square might provide a good indicator of the mood. This was at one time the world’s largest department store and has been a New York institution since the 1900s. It is a middle-class store, somewhat below Saks and Bloomingdales, and carries the lower-end labels of leading American brands like Polo and Tommy Hilfiger.

Macy’s reported dismal sales figures for the traditional shopping season, and ended last year with a US$4.8-billion ($7.2-billion) loss. It will close 11 stores across the US and shed nearly 1,000 employees. The retailer is, moreover, not alone.

Retail giants across America have also recorded poor sales This included Kmart, Target, Home Depot and even Wal-Mart. Taken together, these are signs that the middle- and lower-income groups in the US are feeling the pinch.

Other companies in different sectors are also feeling the gloom in Spring, from telecom company Sprint Nextel to Caterpillar, which makes heavy machinery. Most have already tried implementing unpaid leave, wage reductions, hiring freezes and shorter hours among their staff. But these seem insufficient as they look out at shrinking business in the year ahead. So, they are now resorting to job cuts across the board.

Even non-profit organisations and museums are laying off people, as financial support and giving for charity in the next year looks likely to fall. This includes even the Asia Society, started by the Rockefeller Brothers and ensconced on up-market Park Avenue. As reported in The New York Times, 10 per cent of the staff have been laid off. As I pass their empty desks, it puts a human face to the economic figures of the downturn.

By the end of last month, the jobless rate in the US passed 8.5 per cent, far worse than the Obama administration seems to have anticipated. More cuts may lie ahead. Congress has set aside an extra US$43 billion for unemployment cheques. More types of workers, including part-timers, can claim more money and for a longer period. But if current trends continue, even the billions earmarked by Congress will not be sufficient for social welfare.

The stimulus packages planned by President Barack Obama and other governments across the world have yet to kick in. Some companies stand to gain and can then bring back workers if orders start coming back in. Others however, are taking the opportunity to restructure business permanently and unlikely to replace the jobs they have shed.

So, what lies ahead for the US? More grey days with more losses for companies and jobs? Or will there be seeds of optimism that grow and put out buds and even some Spring flowers? President Obama sees “glimmers of hope”. One small sign is the rise in the government programme to provide loans to small businesses.

A lot has to do with the mood. This brings me back to the aisles at Macy’s. The prices are low and discounts are deep. Yet the crowds are far fewer than you would expect. The sales assistants tell me that there are far fewer customers than last year and that on average, those who buy are buying less.

One new item that seems to be selling well are T-shirts in bright colours — sunny yellows, cheery orange and a sunny sky blue. The trend seems strange. The Spring has so far been wet and quite grey.

But the consumer cycle in the US looks forward to selling things that people need next. So even if it is still cold for Spring, Americans are already planning and buying for summer, when they anticipate sunnier and warmer days. American optimism — as simple and common as a bright T-shirt — may yet come back into fashion.

Author: 
Simon Tay
About the author: 

Simon Tay is chairman of the Singapore Institute of International Affairs and is in New York as Schwartz Fellow at the Asia Society.




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