Releases

Dr. Bernard Weinstein, director of the Center for Economic Development and Research at the University of North Texas, has mixed predictions for the Texas economy in 2009.

Weinstein said that the Texas economy will continue to outperform the nation throughout the next year, but will still feel the pain of recession.

"Texas will slip into recession during the first quarter of the coming year.  Our current unemployment rate of 5.5% will likely reach 7% in 2009, but that will still be much better than the nation, whose unemployment rate is likely to hit 10% by the end of 2009."

Weinstein says that some of Texas' leading industries are feeling the crunch of the global recession already.

"Several of Texas' key industries are now showing weakness: energy, information technology, agriculture, and military procurement," said Weinstein. "What's more, the drop in US exports--a result of the global recession and a strengthening dollar--will have a negative impact on Texas' manufacturing and logistics industries.  In 2007, Texas was the number one state in terms of exports."

Weinstein said that despite a weakened Texas economy, the state will still fare better than most, and subsequently will become a safe haven for individuals devastated in other states.

"The good news is that Texas remains affordable and offers the best long-term employment opportunities in the nation.  I expect to see a huge influx of economic refugees from Midwestern states like Michigan and Ohio over the next two years, as well as a pickup in business relocations to Texas."

Weinstein can be reached for further comment in his office at 940-565-4049 or Bernard.weinstein@unt.edu.  He also can be reached on his cell phone at 214-707-1834.

A full 76 percent of Americans surveyed recently by Consumer Reports' National Research Center said they will buy fewer gifts this holiday season than in past years, which may cause anxiety for those retailers who depend on holiday shopping for the majority of their yearly profits. Consumer spending shrank in the July-September quarter at a 3.1 percent rate -- the steepest fall since 1980.

However, retailers that anticipated an economic slowdown generally have lean inventories that support the companies' adjusted sales forecasts. Retailers with creative sales promotions and careful attention to expenses are the most likely to be profitable, according to Dee Knight, University of North Texas associate professor of merchandising.

"It has been some time since I have seen so much heavy promotion before Thanksgiving," says Knight, adding that she has received numerous e-mail sales pitches from retailers and is receiving more catalogs than usual.

The discounts, she says, have been advertised days and even weeks ahead of "Black Friday" -- the day after Thanksgiving, which this year falls on Nov. 28. Traditionally the start of the holiday shopping season, the day is known as "Black Friday" because it is the date when retailers begin to operate from a profitable, or "in the black" position, rather than an unprofitable, or "in the red" position.

"Typically, the holiday season represents the lion's share of sales. It's a make-or-break season for most retailers," Knight says. "I expect this holiday season to be very challenging for retailers, but people who can afford it will still buy gifts, though the gifts they will be giving may be different this year."

She points out that even luxury retailers are experiencing diminished profits because of the economy. The Neiman Marcus Group recently reported that same-store sales fell nearly 27 percent, while Saks Fifth Avenue and Nordstrom reported decreases of at least 10 percent.

"During lean economic times, the sale of accessories typically goes up, meaning that shoppers are spending less at a store," Knight says. "They may not buy a whole outfit or even a cashmere sweater -- they'll buy cashmere scarves or gloves to have the luxury at a lower price. Or, instead of buying a complete new set of golf clubs, they'll buy one special driver or putter."

The tactics that retailers have been using to encourage spending include promoting their nationally known brands, such as Martha Stewart bedding and kitchenware at Macy's, over their private label merchandise. Knight notes that national brands "can help retailers bear the burden of inventory that's not selling."

"Their partners can give them a markdown allowance or incentives on future purchases. With private label merchandise, retailers don't have a partner, so it takes creativity to maintain margins," Knight says. "Retailers must also provide something other than discounts. Many retailers are lowering prices, so that in itself may not be enough incentive to go to a particular store."

Special promotions such as a free gift with the purchase of a particular item -- a regular tactic of cosmetics companies, Knight says -- may result in shoppers patronizing one retailer over another, and may ultimately be more cost effective for the retailers.

"For example, free gift wrap may be an attractive incentive for consumers to patronize a particular retailer, and it may be less costly than 10 percent off most items," she says. "Retailers must also make shopping an enjoyable experience."

And although Black Friday may not be the start of deep discounts for holiday shopping this year, retailers will still consider it an important day and plan accordingly to entice shoppers, she says.

"There will always be consumers who make going shopping the day after Thanksgiving part of their holiday celebration. They may have out-of-town visitors, and so decide to go to the mall," she says. "And many of the stores will continue to have early morning openings and special promotions for certain items."

Knight may be reached in her office at 940-565-2433, at home at 940-591-0999 or by cell phone at 940-391-6408.

DENTON (UNT), Texas -- The Big Three American automakers – General Motors, Ford and Chrysler – are lobbying Congress for a $25 billion bailout this week.  The CEOs are blaming their financial woes on the current economic crisis, but University of North Texas economist Dr. Terry Clower, says that the auto industries' problems are much deeper.

Clower, associate director of the UNT Institute for Applied Economics, says a bailout package would not address many of the long-standing issues facing the American auto industry.

"The problems that the Big Three are facing are not caused by current economic conditions; current economic conditions have simply worsened an already-bad situation," said Clower.  "The bailout may only delay the inevitable.  At their current burn rate, GM would go through a $10 billion bailout in a few months – certainly not enough time to change labor contracts or corporate culture."

Clower says that bankruptcy laws are designed for these situations, as evidenced by the airlines' use of bankruptcy, or the threat of bankruptcy, to rectify unsustainable labor and financial commitments.

Clower says that the argument for a bailout is largely based on avoiding immediate job losses and the consequences of the large automakers bailing on their pension obligations.

"If GM and Chrysler both declare bankruptcy, about 600,000 pensions will go into the Pension Benefit Guarantee Trust, which will result in Congress having to add billions to the fund to keep it from being insolvent.  Those pensioners will experience an immediate 50 percent reduction in their retirement benefits, which will take a lot of purchasing power out of the economy, not to mention adding costs to the Medicare system." says Clower.  "According to industry economists, for every direct job lost at GM, Chrysler or Ford, about four to five other jobs will be lost across the economy worsening the national recession."

For further comment, Clower can be reached at his office at (940) 565-4049, on his cell phone at (214) 202-4692 or by e-mail at tclower@unt.edu.