As Triangle shoppers flocked to their favorite stores this weekend looking for deals, they offered a decidedly mixed message about where the region’s economy is headed.
Most economists agree the Triangle continues to be one of the best performing regions in the country, but conversations with business owners and consumers paint a more complicated picture.
“I think it all depends on the business you’re in,” said Jill Santa Lucia, president and CEO of Catering Works in Raleigh. “A lot of the companies are sort of putting a positive spin on it, that the economy might be recovering. It’s not doom and gloom for every person.”
With consumer spending accounting for 70 percent of U.S. economic activity, the holiday shopping season is among the best indicators of how people feel about the future. Nationally, holiday spending is expected to increase 3.5 percent to 4 percent this year, according to a survey conducted by the Consumer Federation of America.
In the Triangle, economists point to a number of trends that could foreshadow a good season for local retailers.
“Consumers have been really frugal over the last four years,” said Michael Walden, an economist with N.C. State University, noting that U.S. households have reduced their debt by $1.2 trillion over that period. “I think consumers might be ready to cut loose a little bit.”
He said the improving job market in the Triangle should also help improve consumer confidence.
The jobless rate has fallen a full percentage point to 7.6 percent over the past year as the region added 19,500 jobs, many of them high-paying positions in technology fields.
Meanwhile, the housing market, which has historically been a major economic engine and source of employment in the area, has been showing strong signs of recovery this year. The Triangle has recorded double-digit increases in sales in each of the first three quarters of 2012. “Certainly we’ve got challenges,” Walden said, “but I think things are moving in the right direction for a lot of people and I think that will translate into better buying.”
Still, the economic challenges of the past few years have forced many families to alter their holiday spending habits and some may not go back to their previous free-spending ways. Others may be waiting to see how durable these latest signs of improvement are before making any major purchases. Jennifer Webb and her mother, Sheldon Hagen, helped reduce spending by switching to a secret Santa approach to gift giving. Each person is assigned one other family member for whom they purchase a bigger gift, as opposed to buying a number of smaller gifts for all family members.
“You’re spending a lot less money,” said Webb, who lives in Apex. “It really makes your shopping easier.”
And if the economy improves? “The budget might change a little bit, but we really like it,” Webb said.
The belt tightening over the past few years wasn’t limited to consumers, of course. Many of the corporations and other clients that hire Catering Works for events also cut back.
“We saw a dropoff,” Lucia, the company’s CEO, said. “We’ve modified what we offered.”
She said businesses today increasingly go for traditional fare, such as ham and turkey, as opposed to butlered hors d’oeuvres. Rather than an open bar, clients are opting for beer and wine and a signature cocktail.
Despite the challenges, Lucia said she sees reasons to be optimistic. Her health care clients have continued to provide a steady source of business, and the real estate companies that cut back the most in recent years may soon start spending.
“I feel like people want to say the economy is really bad,” Lucia said. “It’s not been dreadful.”
Scout & Molly’s, a Raleigh-based boutique with three stores in the Triangle, has also seen improvement. The store began carrying items at lower price points in response to the recession, but over the past six months has begun adding back some luxury items.
“People were asking for the more expensive items,” said owner Lisa Kornstein.
One economic indicator that hasn’t recovered: shoe sales. Kornstein said outside of selling a lot of high-end boots, shoes remain very much an optional item for shoppers and she carries far fewer.
“I feel like when people come in and they can buy shoes or clothes, they want to get the clothes,” she said.
Plenty of need
For the McKitchen family of Smithfield, the budget decisions are much more stark.
Kevin McKitchen works as an operations manager at Vishay Precision Group while his wife, Carolyn, has been on disability for several years as she recovered from surgery.
The family’s health care bills, combined with higher costs for insurance, food and gas, have eroded their ability to afford the sort of holiday gifts they used to give. This year the family expects to spend half what it did last holiday season.
“It’s kind of unbelievable,” Carolyn McKitchen said. “Your priorities just change.”
Kevin McKitchen said the Triangle’s economic recovery may not be taking hold in all corners of the region.
“I do think there is probably a certain subset of people who haven’t seen any improvement,” he said.
Many of those people are clients of Yvonne Molina, a social worker for the Salvation Army in Durham, which also serves Orange and Person counties.
Molina recently shortened the appointments she has with clients from 45 minutes to 30 minutes so that she could meet with more people.
“By the time I’m done with my appointments, there are at least a good 50 people still during the day that called for help,” she said.
Molina said some are the long-term unemployed who have exhausted their benefits. Others have had their hours reduced or have failed to land jobs even after attending a training program.
Debbie Avolin, the Salvation Army’s director of social services, said many of the lower-skilled jobs that her clients previously relied on have disappeared in recent years. It remains to be seen whether they will be replaced.
“A lot of them that come in are very discouraged, very challenged,” Avolin said. “Yvonne and I try to allow them an opportunity just to kind of vent and try to help redirect them the best we can with the resources we have available.”