By just about any measure, the U.S. economy is doing very well. Unemployment remains low. Consumers are spending and fueling the economy. Though the threat of tariffs remains poised to wreck much of this economic progress, businesses have good reason to be optimistic.
The National Retail Federation (NRF) agrees. Last week, the industry group reported that retail industry's employment gains between August 2017 and 2018 totaled nearly 90,000 jobs unadjusted. That's good news.
"The strong overall job growth across industries reflects the tight labor market but also shows that the economy is strong,” NRF Chief Economist Jack Kleinhenz, also works with the American Society of Interior Designers (ASID), said in a prepared statement. “Hiring is an important driver of consumer confidence and a confident consumer is a confident spender. Consumers are continuing to drive the economy forward, but the developing trade war remains a threat to the progress we’re seeing.”
Going deeper into the numbers, however, reveal some potential problems for the home design industry. Here's a closer look at the job numbers for the furniture and home furnishings sector and what they mean.
A numbers deep drive
The number of furniture and home furnishings retail jobs decreased in August by 2,000 jobs. When so many reports hail the booming economy, it may seem puzzling that this industry lost jobs, but when you look at the wider picture, it makes a little more sense.
Two other retail groups lost jobs. Building supplies and materials jobs went down by 2,000, and electronics and appliances decreased by 1,400 jobs. All of these together reflect the trouble currently going on in the residential construction and buying markets.
As we've previously reported, tariffs have affected these industries already. The National Home Builders Association reported that increased prices on Canadian lumber have driven up the cost of building a home by about $7,000. Washing machines and dryers now cost 20 percent more due to tariffs placed on imported products and parts earlier this year.
More evidence of this growing problem for the home design industry comes from ASID's most recent billings and index report, which Kleinhenz assembles each quarter from ASID's research. In the second quarter of 2018, both billings and inquiries dipped below the 50 mark, which measures expansion and contraction in the industry (anything above 50 is considered growing). The summer months usually carry strong results each year, so it is both surprising and troubling to see business take a hit in what would usually be profitable months.
In his discussion of the results, Kleinhenz said home furnishings and design service purchases come along with home purchases and new construction, so when those markets are down, it's not surprising that furniture and home furnishings retailers take a hit as well.
While looking can job reports can be beneficial, those in the home design industry would do well to watch the residential construction and buying markets for indicators of economic health. The two are usually linked.
Much as it may pain many retailers, the only thing to do at the moment is wait and see how tariffs on Chinese imported goods will play out. The tariff will likely be between 10 and 25 percent.
Research from the NRF found that while many businesses could feasibly absorb a 10 percent tariff, a 25 percent tariff would be impossible to absorb, and the cost would be passed on to consumers. This could bring growth to a halt and pose serious problems for the home design industry. With so much competition from lower-end, big-box retailers (not to mention e-tailers) as well as innovative, new competitors on the market, traditional furniture retailers could face serious problems.
For now, all retailers can do is wait and see.
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