Here's How The Next Recession Begins

Tyler Durden's picture

Authored by Simon Black via SovereignMan.com,

In 1886 there were only 38 states in the United States.

Electric power was still cutting edge technology that few people had ever seen.

The Statue of Liberty hadn’t even been dedicated yet.

But it was that year that a man named Richard Sears founded a small retail company in Minneapolis, Minnesota that would grow into a retail juggernaut.

Sears was truly the Amazon of its day.

Even in the late 1800s the company was able to deliver just about any product you wanted right to your doorstep.

This was no small feat considering the first delivery truck wouldn’t be invented until 1895. There was no transportation infrastructure. And two-thirds of the population lived in remote rural areas.

Yet despite those challenges, Sears was still able to put any product you wanted in your hands.

Over time as consumer trends changed, the company started opening physical retail stores.

And once the concept of the ‘shopping mall’ became popular, Sears department stores became a mainstay at malls across America.

To give you an idea of the size and dominance of Sears back at its peak– the company owned stock broker Dean Witter Reynolds (now part of Morgan Stanley), Coldwell Banker (real estate brokerage), Allstate Insurance (currently a $33 billion company) and it started the Discover card (a $22 billion company).

Sears seemed unstoppable… a company so large and powerful that it would rule retail forever.

Then Wal-Mart entered the scene.

And after years of focusing on efficient logistics and cost savings, Wal Mart eventually outmaneuvered Sears to become the world’s largest retailer.

By 2001, Wal-Mart’s revenues were about five times that of Sears.

Then Amazon was founded… and consumers began changing their tastes to shop online.

Sears totally missed the trend. And today the company is a tiny shell of its former self.

Over the past three years alone, Sears has lost more than $5 billion. And its stock price is down nearly 75% since 2014.

Plus the company has had to lay off more than half of its peak workforce, around 200,000 employees.

To add insult to injury, the company spent about $6 billion over the past decade buying back its shares at prices as high as $174 a share.

Shares now trade below $9. That’s a 95% loss to shareholders.

Sears recently announced it will close an additional 43 stores (on top of the 265 closures it already announced this fiscal year).

This will leave the company with 1,140 stores – just above half its 2012 size.

This is a death spiral. And it could mean the sudden loss of 140,000 American jobs.

And that’s just Sears. We could see several, large retailers shutter causing hundreds of thousands of lost jobs.

Retailers have announced more than 3,200 store closures this year. And investment bank Credit Suisse expects that number will increase to more than 8,600 before the end of the year.

For the sake of context, the WORST year on record for retail store closures was in 2008 when the global financial crisis kicked off.

But even in 2008, only 6,163 retailers closed.

Bear in mind that about one in 10 Americans works in retail.

And given the rise of e-commerce, most of those retail jobs are going away. Quickly.

E-commerce currently accounts for 9% of the approximately $22 trillion in annual retail sales, up from 0.6% in 1999.

And that number is only growing.

Most retail stores operate very LOW margin businesses. They rely on having LOTS of customers in order to stay profitable.

If even a small percentage of their prospective customers stay home and shop online, they’re finished– from Sears all the way down to the small mom and pop stores.

We could see hundreds of thousands of retail workers lose their jobs as companies like Sears fail.

Sure, e-commerce will pick up some of the jobs.

Large e-commerce companies like Amazon have had to quickly build infrastructure and warehouses to serve customers around the country. That requires lots of hiring.

But it’s temporary work.

Think of it this way: it took a lot of men to lay railroad tracks across the US. It takes far fewer workers to maintain the rail system.

And as shipments increase, you simply run more cars across those tracks.

Plus, e-commerce warehouses are becoming more automated and efficient, requiring less human labor than ever before.

This sort of creative destruction and disruption isn’t anything to be afraid of; there aren’t exactly too many blacksmiths and buggy repairmen anymore either.

Progress occasionally requires the decimation of entire industries, and that’s what’s happening now.

In the long-run it’s better for everyone. But shorter-term, there’s going to be a lot of pain.

Some of the largest and most vulnerable retailers include Sears, Macy’s and JC Penney, and in total those companies employ close to 400,000 people.

All three of these companies could – and probably will – go bankrupt. But it would only take one of these stores going under (a near certainty) to roil the US economy.

You may remember during the US Presidential campaign that candidates Trump and Clinton made a big deal about the declining number of coal jobs in the US.

To put things in perspective, the US coal industry employs just over 76,000 workers.

Sears alone employs almost double that amount.

And the pace of job losses across the entire retail sector is gaining steam.

The US economy has been in ‘recovery’ now for more than eight years, i.e. it’s been nearly 100 months since the end of the last recession.

Yet the average time between recessions in modern US history is 57 months, according to the National Bureau of Economic Research.

In other words, the economy is overdue for a recession.

And the rapid loss of hundreds of thousands of jobs could certainly end up triggering it.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
DinduNuffin's picture

is that how ? pretty sure i have been in a resession since the 90s

FreeShitter's picture

Since dot com, but yea close enough.

So Close's picture

The smartest thing Hery Ford ever did was pay his employees enough to be customers.

froze25's picture

The Band-aid should of been ripped off in 2008, the debt written down and a reset of asset prices should of occurred. But NOOOOO!!!!

FX223's picture

Should we not have to get out of the last recession before we get into the next one?

ReturnOfDaMac's picture

We'll get another chance!  But NOT today, so stfu and btfd.

AlaricBalth's picture

Peak shopping was in 1999.

Chain Store Sales in the United States averaged 6575.01 USD Million from 1992 until 2017, reaching an all time high of 15875 USD Million in December of 1999 and a record low of 3129 USD Million in January of 2017.

http://www.tradingeconomics.com/united-states/chain-store-sales

fattail's picture

Anyone who is worried about this, should be.  The Luddite canard is not applicable this time.  When we moved half the population from agriculture production to industrial factories, retail, and other jobs that required limited education, we moved people from straight physical labor to a job that required the ability to perform a repetitive trask, or to sell something or do some very simple cognitive tasks.  

The move from performing repetitive tasks, sales, or simple cognitive tasks, to thinking critically, analytically, or creatively is  much different and a huge difference from the prior channge.

The hollowing out of the middle class and the despair of the poor is evidence of the difference.  Most of the population can't do that and cannot be taught to do that in any meaningful way.  The suppression of wages by the  influx of illegal immigrants and the governements refusal to enforce immigration laws exacerbated the decline.

The chatter for UBI is just the beginning.  As soon as WWIII starts it will probably quiet down.

Stuck on Zero's picture

One Tainter collapse coming right up.

DWD-MOVIE's picture

I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do… http://disq.us/url?url=http%3A%2F%2Fwww.jobproplan.com%3A68UoF1LgzM-Yo3S...

newworldorder's picture

Add on line retail to that number and you have a reasonably close answer.

HRClinton's picture

Re.. "The smartest thing Hery Ford ever did was pay his employees enough to be customers."

That's because Ford was not beholden to activist, usurious (((shareholders))), forever seeking "increased shareholder value".

Time to phuck these (((Shareholders))) up their well drilled butts, and "Increase employee value".

Because... in a fiat Ponzi system, where 'Capital' is conjured on a (((Bankster))) keyboard, only Natural Resources and Human Labor are the true Value-added things in a healthy economy. It is the Resources that need to be stewardess, and the Human Labor that needs to be rewarded.

It is the diabolical financial (((Usurpers))) who need to be removed from their lofty Ponzi casinos, cast down, bridled and commoditized. To re-learn from Genesis 3:19 

"By the sweat of your brow will you have food to eat until you return to the ground from which you were made. For you were made from dust, and to dust you will return." - Lord God Almighty 

JRobby's picture

The depression that started in 2007 is not over yet.

Recession? By what measurements? Some GOVT statistics?

(Laugh Track Deafening !!!)

LawsofPhysics's picture

^^^This.  TPTB know we have been in a depression, if you use the eCONomic models/definitions from 1970...

let me be clear, return to sound money or roll the motherfucking guillotines, NOTHING changes otherwise.

FreeShitter's picture

I have mine ready, waiting for the opportunity.

LawsofPhysics's picture

good man.  Start a guillotine manufacturing company, I am in.

BandGap's picture

You know as well as I do that the guillotine was a public circumstance. Right now it is not us against the government as in the French Revolution. They have made sure we fight ourselves first. They encourage infighting as it provides cover.

There will be a lot more behind the scenes stuff when this shit kicks off.

LawsofPhysics's picture

sure sure...

Either way my tribe and I are prepared and chance always favors the prepared.

BandGap's picture

As things should be.

The removal of chance is hard to manage unless you keep your tribe small. Lately I am instilling the us vs. them mentality. So hard to do with the more liberal members. Having them witness a true public display of street level justice would certainly accelerate the process.

This is something I think might be necessary but am loathe to experience.

Time is an ally now.

tripletail's picture

Exactly! The author is totally clueless ... yet I some how doubt it, given the sales lead fishing expedition-like flavor of the article. /s

peopledontwanttruth's picture

My thoughts exactly. Take away SNAP, EBT, SS Disability and Welfare and the line for food would start in NY and end in California. It would dwarf any food lines of the 30s.

It's a depression for sure.

centerline's picture

Take them away and the cities would burn overnight.

HRH Feant2's picture

Good! Most of those cities are run by democrats, let them fucking burn! isn't one of the books the Marxists and communist preach abut called, "Prairie fire?" I say spark that bitch up and let them burn to the ground. Can't happen fast enough.

Found it. Figures it was written by that fucking commie, Bill Ayers. http://zombietime.com/prairie_fire/

Got The Wrong No's picture

The only problem with that is the Scum will then be forced out of the Cities into the suburbs and that won't be pretty. Be prepared. 

peopledontwanttruth's picture

You're right and they WILL.

Just give it time

newworldorder's picture

Broke consumers and migrants are now considered net additions to GDP, in Europe and the US.

As long as Govts can send them monthly checks financed by digital entries on an immaginary Govt Budget - all will be well with the Western economies.

Secret Weapon's picture

Most honest comment I have seen in a while.

centerline's picture

That is about right I think.  Might have actually topped in the late 80's.  Hard to say because there are so many variables - depends on how things are measured.  What I do know is that ever since then the economy has been goosed.  Bubblenomics.  Death spasms of a system that has rolled over and cannot organically "grow" it's way out of it's ponzi scheme government and financial systems.

Nobodys Home's picture

I hate the Fed made concept of inflation, but we're so deep in the shit that at this point, without it.....hey wait a minute...we already went bankrupt and never came out of receivership. USINC.

sgorem's picture

i give the us government of the last fifty years ALL the kudo's for the shit we're in. the average taxpayer sure as hell didn't conspire to lower their own standard of living to third world status..........

HRH Feant2's picture

Thanks to LBJ and the great society program the US incentivized the birth of bastard children from unmarried mothers. Who woulda thunk that would result in an increase of unmarried mothers having not just one bastard child, but mutiple bastard children, since there were no consequences for birthing bastards?

Not only did the US reward bad behavior but they also created more government departments, like HUD, to build housing for the bastard children and unmarried mothers. And then decided we also needed to give food to the poor chilluns and mammies.

Read an article on BB, today, about some BLM nigger saying this: "Black Lives Matter Activist Unveils List of Demands to White People: ‘Give Up the Home You Own.'"
http://www.breitbart.com/big-government/2017/08/22/black-lives-matter-ac...

Storm-Clouds's picture

Well the dead don't care....

The dead have noticed a flaw in the juggernaut known as Amazon!

The gig economy delivery persons are inept. Possibly zombie like!

Yup in an effort to reduce delivery expense Amazon has shit the bed!

Yeah but they have cloud sales, video, music, hookers!
(Sorry no hookers the dead are pulling my chains....)

Well the dead have a dragon!

Let us hope he can deliver!!!

Really the dead don't care....

Nobodys Home's picture

Sears sold HOUSES in their catalog!
I still have an old SEARS/Marlin .22
I think one of their big mistakes was Kmart.
.
.
.
"Progress occasionally requires the decimation of entire industries, and that’s what’s happening now... In the long-run it’s better for everyone. But shorter-term, there’s going to be a lot of pain."

That sounds almost Marxist.

centerline's picture

Yeah, it does sound funny.  Almost like it should say "...might be better for some the survivors."  lol.

pynky01's picture

My old daddy RIP ... a very smart guy... told me more than once ..."Son, the next depression (not if but when) will make the Great Depression look like a cake walk and we will have a change in the form of our government.".... I think he read that somewhere... supporting failed anything is against nature...and you don't fuk with mother nature ... unless are willing to face the unintended consequences... but hey ...TPTB didnt have to face them...we did... he also told me ...the stock market was like a crap game... but damn these banker types playing with loaded dice...the jews get rich win or lose ...and the goy gets to pay ... nice job if you can get it ..but you cant unless you kneel at the altar of greed in the synagogue of satan... 

wholy1's picture

LOLRO:  " . . . NEXT recession . . . ".  As a fomer "globe-trotter", I follow Simon regularly.  But . . . au contraire:  welcome to the GreatER DEPRESSION, genesis 2007-09 cuz . . .  it's an [on-going, probably accelerating] P-R-O-C-E-S-S like just about everything else "IN ths world". The "song/'notice" remains the same:  R-E-P-E-N-T and RE-covenant with the Lord accorded thru the Redemption.  For those who can't/won't bug to a different "nation venue", pls consider:  Want to "survive to thrive"? Get out of the "urbs"/"C'ville flusterclucks"/social sewers. Get away from the "coasters", nuke plants, major roadways. Get "hunkered-down", "S-I-M-P-L-I-F-I-E-D" on an inland, RURAL, UNaddressed/UNencumbered portion of ARABLE county dirt? Get GROUPED, GUNNED, GARDENED, PROVISIONED.  The "Blessings from the Beginning" are revealed and therefore accessible to the "gather[ed/ing]-together" Remnant[s].  If ya haven't got that garden producing yet - SHAME ON YOU! (smile).

Nobodys Home's picture

Good points but...You were a Globe Trotter! Did you play with Meadow Lark and Goose?

Rebelrebel7's picture

The problem with retail, aside from incredible lack of disposable income for the majority of the population, combined with high debt levels, and low labor participation rate is the stupid reliance of automatic inventory reordering through computers. 

It is fine to use it as a tool. To completely rely on it is an enormous problem, particularly because many inventories are serviced by distributors, sabotaging competitors merchandise in the grocery stores, placing their merchandise in front of it so that the retailer falsely believes that it doesn't sell, and discontinues the item. In clothing, if red shirts sell more, more red shirts are automatically ordered, and pushing out alternatives, not realiizing thast people bought  red shirts for another reason, like  a terrible alternative, then people stop shopping there, because the selection is terrible!

It is a typical garbage in garbage out scenario!

J Mahoney's picture

STOP THE RETAIL JOB LOSS AND RETAIL REAL ESTATE BUBBLE FROM POPPING TOO FAST ---IT IS TIME TO UN-SUBSIDIZE  EBAY, AMAZON, AND THE CHINESE MIDDLE CLASS AND HELP THE USA TAXPAYER

We NEED TO IMMEDIATELY DO AWAY WITH a little known Asian subsidy which is KILLING us folks but enriching the richest man in the world (Bezo) and making a middle class in China. Did you know a small package sent by an Asian online seller only cost them about $1.00 vs the $20.00 we would have to pay to send a package to Asia. We even provide tracking services on that freaking package. This was pushed down our throats thru the “heavy lobbying” by Ebay and Amazon.

DO AWAY WITH the “Bezo Subsidy” or more easily thought of as “BS” --  Just the headlines about retail store closings tell us about jobs being lost and commercial real estate getting ready to tank, (Store closings---just a few—Penny’s 130-140 stores, Sears/Kmart 150, Macy’s 100, Foot Locker 100, Kohls 16, Office Depot 200, Abercrombie 114, BCBG 118, HH Gregg 88, Pier One 100). Without this subsidy, brick and mortar store would INSTANTLY be competitively priced on THOUSANDS more items.

Problems with this is:

1) Post Office loosing hundreds of millions delivering these cheap packages (taxpayers left holding the bag making up for their losses and eventual USPS pension shortfalls)

2) Uninspected goods come in, many of which are in violation of intellectual property laws and safety regulations.

3) USA stores can’t compete- thus many previous full time jobs in retail have disappeared altogether or with lower paying and reduced benefit part-time jobs.

4) Foreign online sellers are NOT paying any sales tax, income tax, or tariffs like the importers in the USA.

5) Lost jobs equals social security taxes NOT COLLECTED--another freaking problem waiting to rear its ugly face.

TRUMP—do away with only this one unfair trade deal and positive results will be felt FAST in our economy.

detached.amusement's picture

20 bucks to send something to asia?  using what carrier?  it costs double that just to send something by truck across the goddamed country these days.

but muh free zhippinz!

J Mahoney's picture

You are freaking right--just sent something--it cost $45. Even pisses me off more that they can send crap here for nothing

ToSoft4Truth's picture

Sears doesn't have a union - otherwise they'd get a bailout just like GM.   Since they didn't have a union, Cramer sent Eddie for a controlled looting. 

Benito_Camela's picture

Did Goldman have a union? Citi? AIG? 

 

In any case, the union pensions may have been the cited reason for the bailouts, but let's get real. The American firms were making shitty cars that got horrible gas mileage and then the economy tanked and gas prices skyrocketed. Nobody wanted the gas guzzling American cars all the sudden. It wasn't the union's choice to adopt that corporate strategy. It was the elites (large and institutional shareholders greedily forcing decisions to build high margin/low efficiency vehicles) and upper management at the automakers. 

assistedliving's picture

after all my complaining...my life is good

my children's?  grand children??

Herdee's picture

Add-in a mortgage tax deduction "modification" being considered right about now. Why? The federal government is insolvent, they will find ways to screw the little guy for more taxes as they head towards default or hyperinflation through infinite money printing. Eventually it will be zero because of no plan to finance their unfunded obligations going forward and no tax money to pay for any of the liabilities. It's a slow-mo train wreck coming.

https://www.cnbc.com/2017/08/22/changing-mortgage-deduction-would-discou...

 

messystateofaffairs's picture

According to Shadowstats and Joe Averge  how can the next recession begin when the last one never ended.

Nobodys Home's picture

It's like a reciprocating sine wave. The affastafis reaches it's peak as the parambulator multiplies the modulation of the wave from 30 %. Simple really.