Jobless data

Today unemployment figures for the previous were released and they were worse than expected with an increase in those seeking unemployment benefits of ~32,000. While not a positive number, I have to emphasize that 32,000 newly unemployed over a U.S. population of approximately 305 million is nothing and is an increase equal to one-thousandth of one percent.

Not surprisingly, investors today ignored that data and instead focused on the results of big retailers, including Wal Mart (ticker: WMT) and Kohl’s (ticker: KSS). WMT had first quarter U.S. sales that were up 3.8% with same-store sales up 3.6%. Sales at KSS were down but less than expected. The results of both companies are considered positive. Why?

Remember that 65-70% of U.S. Gross Domestic Product is consumer spending, so any sign that U.S. consumers are spending money is going to be received positively. Interestingly, Wal-Mart reported that a large part of their sales growth is coming from new customers. Those new Wal–Marters spend an average of 40% more than old customers. What’s interesting to me is that this is an indication of the consumer mood. Wal-Mart’s motto of “Everyday Low Prices” has established in the U.S. consumer’s mind that they are best off shopping at Wal-Mart if they want to save money. So for WMT to be gaining new customers means that there are a number of people who have switched to WMT for their shopping needs from some other source. Yet most people don’t know that WMT is barely cheaper than its competitors, such as Target. Thus, U.S. consumers are still spending, they just want to alleviate their fears that they are over-spending, so they are “trading-down” in their mind to Wal-Mart. Hmmm.

My interpretation is that U.S. consumers are still buying, but that they are afraid to buy. To me this is an indication that once there starts to be some good economic news – like a positive GDP growth number – that folks will up their spending. It will then be interesting to see if Wal-Mart retains its new customers.

Jason

PS – I finally have the ability to track usage statistics on the blog and I can see that some of you are spending over an hour reading the blog when you come. Wow! Thanks for making the blog a part of your day! I am humbled by your interest.