Opinion

Editor’s note: boom or bust

BY Seth Mendelson

Warning: A strong economy does not necessarily mean great times for the mass retail industry.

In fact, it may mean a lot of trouble for retailers trying to keep a steady balance among the various facets of their businesses.

And, we may be about to find out just how crazy the good times can be. A combination of factors, including the just-implemented Republican-led tax cuts, the best wage increases in more than two decades and a pretty good feeling among consumers, appear to be spurring an economic engine that is getting hotter and hotter by the day.

Sounds like a perfect scenario for retailers, among others, to cash in. A happy consumer, flush with disposable income and eager to spend, should mean more rings at the cash register for merchants, and that would quickly translate into greater profits for all: retailers, distributors and manufacturers.

But there are signs out there that the economy is growing at too fast a clip. Unemployment could fall to the dreaded 3.5% mark — or lower — the point where economists have said that everyone who wants to work is working. That means that retailers, with historically huge employee turnover rates, and always in search of new workers, will have to pay more — maybe much more  —  to get people to work at their stores, especially during those dreaded weekend and night/overnight shifts.

Even worse, retailers may not be able to find enough qualified workers, and will have to start paring hours because of the lack of employees to man the store. Frankly, some will have to rework their entire business plan because of a worker shortage or big increase in compensation.

Sounds implausible, you say. Well, this has happened before. In the late 1990s, a booming economy caused a combination of increased wages and worker shortages that played havoc with retailers looking to cash in on optimistic consumer sentiment and the desire to spend, spend and spend some more. Many retailers were so desperate that they were hanging signs from their windows imploring people to apply for work at their stores, offering wages that were sometimes near double the minimum wage and other costly benefits. One Northeast-based chain was even offering gift cards to consumers if they could help them hire and retain new employees. Often, however, the people they found were not the cream of the crop, which caused its own set of problems.

Here’s the worst news of all. There is not much the retail community can do if this scenario plays out. Economics being what they are will force merchants to look harder and longer for the right employees, and will make sure they take the right steps to keep their current workers more content and less willing to leave for greener pastures.

In the end, we all want the good times to roll, but just not too much, it seems.

 

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