Video: Grim outlook for holiday shopping season

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    >> the least. peter, thank you.

    >>> grim outlook for the upcoming holiday shopping season. retail sales expect to drost 1% from last year's lackluster performance. unemployment now at 9.8%, a 26-year high. the white house insists there will be no second stimulus. john harwood is cnbc correspondent and robin is with us. great to see you, john.

    >> hello, monica.

    >> we are hearing the white house talking about in discussions potentially extending safety nets out there. that's great but, ultimately, people who are noimed out there they want jobs. how does the administration get americans back to work?

    >> that's what they are working on. the administration believes their economic plan is working the markets are beginning to recover. they've always said unemployment is a lagging indicator and it would keep rising even after they thought their program would work. it's rising to the point now where they are feeling pressure to do something more and so what they are sifting through is extending some tax breaks that were in the stimulus plan and coming up with new tax breaks if they can find workable ones that would stimulate new hirings. not easy to do.

    >> robin, we hear about the additional options that they are exploring but saying it's not a second stimulus. if anything, a extension of the first stimulus. what is the difference?

    >> it's not semantics. give credit for the administration for looking extra coins under the couch cushion. in the end we have 1.5 trillion deficit to grapple with and the rules of physics here even apply in economics. and they can't distinguish out and -- they can't write another stimulus project. in fact, they themselves say that the formal stimulus projects already haven't fully been absorbed into the economy so a wait and see approach but midterm elections are approaching as well.

    >> how bad will the democrats get hit in the midterm elections if unemployment continues to rise through early part of 2010 if it is expected to do?

    >> bad and what they are worried about. we know the party that holds the white house , typically, lose is seats in a midterm election once a new president takes office. barack obama had a decisive victory last year and washes this people who are weaker incumbents. if you see unemployment rising and staying over 10% a good part of next year, that is a real danger zone that would suggest you have extraordinarily large losses by the democrats. probably not enough to lose control of the house but enough to weaken president obama and the one thing i would add about your stimulus point earlier, whatever they do, however expensive it is they are not going call a second stimulus because they think that term has been discredited standing for pork and government intervention in ways the american public doesn't like.

updated 10/6/2009 12:58:28 PM ET 2009-10-06T16:58:28

After parents cut back on clothes and accessories for children this past fall, the retail industry suspects they won't be any more generous by the holidays.

The National Retail Federation, usually bullish about holiday sales, predicts a 1 percent decline in total sales to $437.6 billion for November and December combined. The projection from the world's largest retail trade group comes amid forecasts that U.S. retailers saw a key measure of sales drop in September for the 13th month in a row compared with a year earlier.

The NRF is less optimistic this year than several other groups offering holiday sales forecasts.

"We just don't see a sharp turnaround in consumer sentiment and spending until employment and income look a lot better," said Rosalind Wells, chief economist at the Federation. "Shoppers are going to remain very frugal."

NRF's figures exclude sales from restaurants, gasoline, autos and online business; they include low-price retailers, department stores, grocery stores and specialty stores.

Last year, the Washington-based NRF issued a 2.2 percent growth forecast in mid-September just as the financial meltdown ballooned. The trade group decided not to offer a reduced estimate because the spending climate was deteriorating so quickly that forecasters couldn't be accurate. The industry ended up having the weakest holiday season — when compared with the previous year — since at least 1967, when the U.S. Commerce Department started collecting retail sales data.

So far, holiday 2009 forecasts range from as weak as a 3.5 percent decline from Wells Fargo senior economist Mark Vitner to predictions at the top end from Deloitte Research and TNS Retail Forward that sales will be the same as last year.

Job security is a key factor in consumers' ability and willingness to spend, and the latest government jobs report, issued Friday, fueled more concerns about the holiday shopping season. The figures showed unemployment ticking up to 9.8 percent in September, a 26-year-high, and employers shedding 263,000 jobs, more than the 180,000 forecast by economists.

Those seeking work also have fewer prospects: The average time to find a job is 26.2 weeks, up from 19.8 weeks in January.

Meanwhile, shoppers continue to grapple with tight credit and dwindling net worth.

Last fall's steep and swift spending drop came too late for retailers to cut their inventory or orders, which left them with no option but to steeply discount the piles merchandise already headed for their stores.

Analysts expect stores won't be in the same panic mode this year because they have cut inventory, but there still will be generous deals and stores may have a hard time predicting what shoppers want.

According to a recent study by BDO Seidman LLP, a leading accounting and consulting firm, 60 percent of finance executives at top U.S. retailers say there is greater risk for stores in having too much inventory than not enough.

BMO Capital Markets analyst John Morris estimated that the volume and level of discounts at the 25 mall-based apparel chains he follows already are up 5 percent even though they have 15 percent less inventory than a year ago. That indicates retailers feel it takes "a carrot and a stick" to get shoppers into the store, he said.

"We are not seeing any consistency in consumer strength. The consumer is responding to need and promotions," Morris said. "We will likely have a disappointing holiday season."

Morris and other analysts will be dissecting the September sales results coming Thursday for any more insight into consumer behavior _ specifics about hot sellers and weak spots — and traffic patterns. Thursday's figures, for sales at stores that have been open at least a year, are considered a key measure of a retailer's health.

The federal figure for September's monthly retail sales, which includes a much broader range of businesses such as auto, gasoline and building materials retailers, is due out Oct. 14. Economists surveyed by Thomson Reuters project a 1.4 percent drop.

Michael P. Niemira, chief economist at the International Council of Shopping Centers, forecasts a 2 percent drop for September for sales at stores opened at least a year. That compares with a 1 percent decline last year when the free-fall in spending began. That even takes into account benefits from a late Labor Day and this year's later school openings.

The figures exclude results from Wal-Mart Stores Inc., which stopped releasing monthly data after its report for April.

Niemira expects sales trends to improve in coming months, however, and to rise 1 percent for November and December, compared with the 5.8 percent drop a year ago. He cautioned that this year's numbers will look better in part because last year's plunge was so steep.

"The turn is upon us in the upcoming months, but it's mainly driven by the arithmetic," Niemira said.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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