The holiday season is always an important time for the economy.
Many merchants make the majority of their yearly sales during this time.
As a result, the season provides a boost to the economy as more people are employed in anticipation of the increased activity.
As a rule, economists "seasonally adjust" data such as retail sales and employment to observe the monthly growth in the economy without the fluctuations caused by events that occur during the same period each year.
For example, employment and sales rise in November and December because of holiday buying and drop off in January after consumers have finished returning their unwanted gifts.
The statistical procedure of seasonal adjustment smoothes out these changes so that the broader view allows for the prompt recognition of significant changes in the direction of economic activities.
Sometimes it is useful to look at the numbers before they are seasonally adjusted to get a better understanding of the magnitude of change the holiday season has on the economy.
Not seasonally adjusted data indicate that employment at retail stores in the nation grew by an average 3.33 million jobs from 1993 through 2001. On average, 765,000, or 23 percent, of the retail jobs were added each year during the three months from October through December. In contrast, during the following January, 695,000 employees were let go.
Within the retail sector, stores that sell general merchandise, sporting goods and books see more than 50 percent of their hiring during the three months from October through December. Layoffs during the following January averaged about 80 percent of those hired in the previous three months.
Rising unemployment rates, uncertainties of war, and modest increases in wages led to weak holiday sales in 2002. In fact, retail employment rose only by 688,000 jobs during the three months from October through December and declined by a larger-than-usual 712,000 jobs the following January. Based on October and November hiring for 2003, it appears that the retail industry in the nation is on a similar hiring path as in 2002.
Employment data for the Richmond-Petersburg metropolitan area are not as detailed as in the nation. Nevertheless, total retail sales show a similar trend.
Employment at Virginia retail stores grew by an average 18,000 jobs from 1993 through 2001.
During October through November, an average of 5,000, or 27 percent, of the retail jobs were added each year, and an average 4,000 were subsequently let go in January of each year.
In 2002, retail employment in Richmond rose by only 4,000 jobs and then fell by 5,000 in January. In 2003, hiring in Richmond picked up more than in the nation because of the two local malls that opened in September, Short Pump Town Center and Stony Point Fashion Park.
So, if you find yourself spending more than you expected during this holiday season, at least you can find comfort in knowing that you are supporting the economy during an important period, seasonally speaking, of course.
Dr. Christine Chmura is president and chief economist at Chmura Economics & Analytics. She can be reached at cchmura@chmuraecon.com
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