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alstry (35.87)

Sharp Slowing in June???

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June 19, 2008 – Comments (7)

Industry-wide sales so far in June have been about 20% worse than Chrysler's expectations for the year, according to the memo....

And so far in June, he said, J.D. Power and Associates and Citigroup are seeing a sales pace that is almost 20% lower -- only 12.5 million vehicles per year.

http://www.freep.com/apps/pbcs.dll/article?AID=/20080618/BUSINESS01/806180321

This was confirmed by CarMax's CEO:

Our first quarter sales were modestly below expectations and earnings were disappointing,” said Folliard. “Sales slowed through the quarter, and since Memorial Day weekend, traffic and sales weakened further. If the current trends persist, results for the full year could be significantly below the bottom of our original earnings guidance range.

As a result of the combination of the uncertain economic conditions, rising fuel and food costs and weak consumer sentiment...we are temporarily suspending guidance on comparable store sales and earnings for fiscal 2009.

http://biz.yahoo.com/bw/080618/20080618005604.html?.v=1

Now airlines are cutting capacity and cutting out cities from its routes.  This means millions of travellers will not be travellling.  Tickets that were $400 are now $1400 in some cases.  Businesses are cutting back on trips.  So are consumers.  Just the effect of deminished air travel will be profound....especially on those areas dependent on cheap fares for business like Las Vegas and Orlando.

In talking to friends that own shipping companies and restaurants, similar trends seem to be occuring in their industries....especially with the shipments of printed matter which is a very ominous sign.

Based on a few conversations with industry workers,  it appears a number of retailers advanced June sales into May....especially in clothing.  Even so, many chains had negative comps....we could see some very ugly numbers for June.

What makes this contraction so different is the depth and breath.  It is affecting so many industries and now even health care. 

The question is how will all these leveraged consumers, businesses, and municipalities deal with HUGE debt burdens with rapidly declining revenues?

 

7 Comments – Post Your Own

#1) On June 19, 2008 at 8:46 AM, alstry (35.87) wrote:

There is a very disturbing trend going on in America right now.  Many Americans are losing their jobs and are unable to replace them.  After six months of looking, you are no longer counted as unemployed...WTF?

For those fortunate to find replacement work, many are accepting much lower pay and benefits.  With costs rising at rates we have never seen before, millions of families simply can't make ends meet and are effectively functionally unemployed.

At this point, I see no signs of this trend reversing.  As more and more families see their incomes decline, we will see more and more defaults and foreclosures.

I have seen this trend for over a year.  It appears that many more are beginning to see this very serious issue.   It may help explain why we are seeing this dramtic slowdown in June.

The problem is that as the trend continues, it will only get worse going forward.

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#2) On June 19, 2008 at 9:38 AM, leohaas (33.49) wrote:

It is hardly surprising that car sales for manufacturers that are only good at making gas guzzlers (like Chrysler) are tanking. That is due to the rapid increase of gas prices. Try to get your hands on a hybrid: you'll have to wait months.

"After six months of looking, you are no longer counted as unemployed...WTF?"

That is a common misconception. I used to believe it myself. Sure, you cannot collect unemployment benefits after 26 weeks, but you are counted as unemployed if you meet 3 criteria: Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work.

 

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#3) On June 19, 2008 at 10:24 AM, alstry (35.87) wrote:

Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work.

 

I understand the rules.  You tell me how many people fall within the above after being rejected for six months.

This issue is how many people are not making an income.  If you are not making an income, it doesn't matter how you are classified, you are not spending.

Then once you factor the under employed, or what I call the functionally unemployed, and we are facing a trainwreck.

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#4) On June 19, 2008 at 11:57 AM, jesusfreakinco (28.93) wrote:

It will be interesting to see SSS in light of persistent gas prices, higher interest rates, lower consumer confience, higher inflation expectations, and tailing off of stimulus checks.  Perhaps those receiving checks later will put more towards gas and less towards discretionary spending.

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#5) On June 19, 2008 at 1:20 PM, leohaas (33.49) wrote:

"I understand the rules."

Not so sure you read them. It does not say anything about excluding people who have been looking for more than 6 months.

"You tell me how many people fall within the above after being rejected for six months."

I was unemployed for 2 years! I never gave up, and now have a job I really enjoy (and pays the bills--all of them). I spent some of my jobless time getting certifications, and everyone I met in the program had been unemployed for several months, was rejected numerous times, but kept faith about eventually landing a new job.

Of course, unemployed people are not spending. It is also true that many are being layed off, and that many of those who find a new job will have to take a pay cut and/or benefit cut. That is not good for the economy, especially in times when the prices of the necessities in life go up fast. You are doing a good job of pointing that out (though I think you are going over the top).

But when trying to make your point, please stick to the facts. The sentence in Comment #1 ending in "WTF" is factually incorrect.

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#6) On June 19, 2008 at 1:36 PM, alstry (35.87) wrote:

First, I have very happy about your landing a satisfactory job. 

Please let me rephrase the above to your satisfaction:

After six months of looking, you are no longer counted as unemployed...unless you do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work...wtf.

A couple points:

What percentage of those losing their jobs right now in the current environment are replacing them with jobs of equal or greater compensation...how many are working at starbucks, mcdonalds and walmart simply for benefits?

What percentage of workers do you think are actively looking for a job in the sixth, seventh, and eighth month of unemployment in order to be counted as unemployed? 

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#7) On June 23, 2008 at 2:11 PM, hansthered0 (< 20) wrote:

Good point about that unemployment loophole. Maybe the media prefers to keep people happy with false numbers.

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