Teen, Lean and Mean

Consumer spending has been hampered by an horrific housing market – values plunging and destroying middle class net worth – as well as by chronic unemployment and under-employment. For teens, the “parental bank” shut down tightly after the crash that began on September 15, 2008 with the fall of Lehman Bros. With little evidence of improvement, current or projected, in these two middle class economic indicators, and the Consumer Confidence Board telling us that February showed a steep decline in the consumer confidence index, there is little reason to expect any significant increase in grassroots buying. Luxury retailers are staggering under this negativity, and many high-end designers are experiencing threats to their very existence as even the well-heeled shoppers are keeping the pursed closed.

Teen trend retailer, Abercrombie & Fitch – famous for its sexy ads and above average pricing – experienced 20 months of sales declines. In fact, teen buying in general dropped for a full 18 months. Mall traffic had declined to such an extent that mortgage defaults among shopping centers hit record levels. Bleak was now “normal and expected.” Adults still have zipped their wallets, but there has been an interesting movement among teen shoppers. They’re coming back to the malls, buying again, and even upscale venues like Abercrombie are experiencing improvement (like a recent 8% increase in sales).

Parents tend to spend on their children before they spend on themselves, so movement in teen spending suggests that adult spending – at least among those who have jobs and believe that they won’t lose them – may not be too far away. These younger shoppers not only follow fashion among their peers (they are the first line in pop culture), they are also growing and changing sizes. Pent-up demand has opened the door… a bit anyway. The rising buying trend is a necessary precursor to bringing back the unemployed. Without increases in consumer demand, there is no reason to expect any real change in the unemployment numbers. And even with increases in consumer demand, employers are likely to pick up the initial slack with their existing work force – adding overtime before bringing back massive numbers of employees. Only after there is proof of consistent demand are we likely to see any meaningful positive movement in the employment picture. With possible contractions in credit (or at least no improvement in credit) or in the moribund housing market (existing home and new home sales both fell at the last measure), this nascent improvement could stumble and drop back to the lower levels of consumer spending; only time will tell.

The March 27^th Los Angeles Times examined the new freer spending habits of high schoolers and college students: “The resurgence in spending has led to two straight months of year-over-year sales increases for teen retailers after 18 months of declines, according to Thomson Reuters… In January, the sector -- which includes American Eagle Outfitters Inc., Aeropostale Inc. and Wet Seal Inc. -- posted a 6.5% year-over-year increase, making it the month's biggest outperformer… [In February] teen retailers again beat expectations with a 5% sales increase, far better than the 2.3% decline analysts had forecast, Thomson Reuters said. At the top of the pack was action sports retail chain Zumiez Inc. of Everett, Wash. Results are based on sales at stores open at least a year, known as same-store sales, and considered a reliable measure of retail health… ‘You've seen teens come back pretty aggressively in terms of spending,’ retail analyst [Christine] Chen said. ‘Teenagers are not a savings-oriented bunch. They spend every dollar they get.’” Yup, teenagers with mortgages and retirement savings accounts are indeed a rarity.

Looking for signs of hope, in a landscape that suggests otherwise, is an important part of moving closer to the kind of “recovery” that has all-but-eluded most Americans, even as the stock market allowed the “experts” to declare the recession over and the recovery commenced when average Americans totally know that is far from reality for them. We need reasons to resume that self-confidence that has defined Americans for so long.

I’m Peter Dekom, and there are occasional glimmers of light.