The State of the Economy

According to the National Retail Federation, the Retail Industry overall saw a 2.8% decline during the November-December 2008 holiday season. The Federation expects sales for the first half of 2009 will be down 2.5% from a year ago, and it is expected to drop even further as 2009 progresses.

Although retail spending is down overall, high-end chains have witnessed a particularly startling decline. Saks, for example, the owner of Saks Fifth Avenue, reported a 14.4% sales decline for its fourth quarter, which ended Jan. 31, compared with the same period a year ago. Neiman Marcus Group reported a 22.8% drop in comparable store sales for the same three months.

Cutbacks by affluent consumers the mainstay of the Airlines and Auto Industry, are clobbering those industries. Last year was the worst year for automakers in more than a decade, with vehicle sales falling more than 18% for the "big six" -- General Motors, Chrysler, Ford, Toyota, Nissan and Honda -- and according to the Bureau of Transportation Statistics (BTS) the number of passengers booked on U.S. domestic flights declined 3.3% in the first 10 months of 2008.

The statistics are mired in distraction as large companies and industries downsize. The U.S. scheduled passenger airlines employed 6.7 % fewer workers in December 2008 than in December 2007, the sixth consecutive decrease in Full-Time Equivalent employee (FTE) levels for the scheduled passenger carriers from the same month of the previous year, and the largest year-to-year decrease since December 2003, the U.S. Department of Transportation's Bureau of Transportation Statistics (BTS) reported. The December FTE's 391,918 for the scheduled passenger carriers was the lowest total since 1993. FTE calculations count two part-time employees as one full-time employee.

Passenger Counts:

Northwest Airlines Corp.and Delta Air Lines Inc. both reported decreased passenger counts in November 2008, as the U.S. airline industry saw its biggest drop in scheduled domestic and international passengers since January 2002, according to statistics released by the U.S. Department of Transportation. The number of passengers fell 12.8 % to 54 million industry-wide in November from a year earlier. November is the most recent month of data available.

U.S. airlines operated 767,100 scheduled domestic and international flights, down 11.9% from November 2007.

Eagan-based Northwest Airlines ranked seventh among U.S. airlines based on the number of passengers, but it saw the biggest decline from a year ago, falling 20.7% to 3.3 million in November 2008.

Northwest’s parent company, Atlanta-based Delta (NYSE: DAL), ranked third with roughly 5.6 million passengers in November 2008, down just 2.9% from the November 2007.

Dallas-based Southwest Airlines Co. finished first with more than 7.4 million passengers for the month, down 10 % from a year ago.

Through the first 11 months of 2008, the number of scheduled domestic and international passengers on U.S. airlines dipped 3.5% to 684.1 million. (Department of Transportation Statistics).

During that period, Northwest ranked sixth among U.S. carriers with about 45.3 million passengers (down 8.6 % from a year ago) and Delta was third with 65.8 million (down 2.1 %) Southwest again finished first with 94 million passengers (up 0.1%).

Meanwhile, Hartsfield-Jackson Atlanta International Airport remained the busiest U.S. airport during the first 11 months of 2008, with 39.6 million domestic and international passenger boardings.

At the moment, the uneasiness among high-end consumers is more about fear than real economic hardship. Though unemployment has risen for college-educated professionals, it remains relatively low, hovering around 3%. That is a lot lower than the 10% rate for workers without college degrees; but reports of layoffs at companies, such as Citigroup, Microsoft and law firm Clifford Chance and others, have made it clear that even the highly educated are not safe or immune from the economic downturn - a downturn caused by the greed of the Banking Industry, Wall Street, and an Administration that lacked both focus and direction.

Like us here in the real world, the affluent are worried about their jobs and they are worried about their access to credit. To date layoffs have been witnessed in the Medical Field and in all of the trades, industries and professions. No one is immune!

All of that is making people much more cautious as to what they are going to spend and on what is important to them. Consumer confidence is both crucial and lacking today as the economy slips further into a real deep routed and devastating Depression from which few will emerge unscathed.

Consumer confidence -- a measure of how consumers feel about the strength of the economy and the availability of jobs -- is now at its lowest level since the Conference Board began its confidence survey in 1967, 42 years ago.

Wealthy consumers typically have more money at risk in investments than the average person and consequently are more likely to have taken a substantial hit from the wreck of the stock market. With the Dow Jones Industrial Average down more than 40% from its October 2007 highs, the damage has been extreme in many cases. Even those who entrusted their capital to high-end hedge fund managers have experienced hefty losses. According to Hedge Fund Research, a firm that studies the industry, the average hedge fund was down about 18% in 2008.

Then there is the bloodbath in Real Estate. America's affluent families have joined the rest of the nation in looking on with dismay as the value of a single-family home has fallen more than 18% in just the past year, as measured by the S&P/Case-Shiller 20-city index. (New York City home values have held steadier than most, however.) Yet in places like California, Nevada, Utah, Washington and Florida the downturn is much higher, averaging more than (40%) in some areas of the country.

The loss of capital has left many affluent families feeling more vulnerable than ever before. No longer can they rely on the cushion of capital to see them through the loss of a high-paying job. The loss of a salary would mean the loss of the lifestyle they have grown accustomed to. It is relative “we”- all of us - tend to live above our means.

The economy has been impacted at all levels of income. Why? Because of one single industry whose greed has left the world reeling in dismay, as families are torn apart and personal and corporate bankruptcies soar.