The summer months present all kinds of interesting economic challenges and they often take on a disproportionate importance as analysts try to puzzle out what happens next. Here are five particularly interesting summer developments to consider:
Impact of summer on employment -- It has been a weaker year for part-time employment than in past years though the numbers of summer jobs was up over last year or 2010. The main problem is that most of the summer jobs that usually go to the younger workers never materialized. By some measures, these opportunities were reduced by 20% from those of 2008.
Factory Layoffs -- These are the months that factories, especially in the auto industry, often idle as they gear up for another season. The laying off of assembly line workers for a few months is so common that those who gather labor statistics figure in these temporary layoffs to keep the data smooth. This year the sector did not start dismissing workers until later in the season and, in many cases, they did not lay anybody off at all. Was this a one-year phenomenon based on demand for cars this year, or has the re‐tooling been streamlined to the point that layoffs will not be necessary in the future?
Family Vacation as Tradition -- In the last several years, there have been some dramatic shifts underway as the consumer reacted to high gas prices, high rates of joblessness and general angst about the state of their financial position. It was anticipated that this would be another down year, as most of these factors remained in place. The good news was that gas prices fell, and that might have been enough to convince some people to hit the road.
Heat and Drought -- This has been a brutal summer for the farm sector as well as for the general population. Record setting heat and the almost total lack of rain created an unexpected crisis. The crop losses have been devastating, and now the question is whether this is the beginning of a hot and dry cycle or a one‐off year. The impact on the consumer will be felt more next year than this one. Commodity prices are only about 15% of the price of food, but there is a cascading impact that will drive overall food inflation up by roughly 5% next year.
Back‐to‐school shopping -- Thus far, it is starting off in decent shape. The next two weeks will be the key period, as this will show the mood of the consumer going towards the most intense retail period of the year. If volume is up in apparel and electronics from last year, that will be a very positive sign. If the shopping is more focused on the essentials, that will not bode all that well for the months to come.
-Chris Kuehl, PhD, NACM Economist