Saturday, November 24, 2012

Black Friday

The comparison to the bubonic plague hits the nail on the head. 

From Marketplace...
The term itself has an interesting history. In the 1950s, some factory managers referred to the day after Thanksgiving as "black Friday" because so many workers called in sick. The day, noted one industrial magazine, was "a disease second only to the bubonic plague" in its effects on employees. In the early 1960s, Philadelphia cops used the term to describe the intense crowds of shoppers and traffic that poured into center city on the day after Thanksgiving. It was hardly a term of endearment. All the people and congestion made police work more difficult. As a sales manager at Gimbels said, watching a cop trying to deal with a group of jaywalkers, "the police think in terms of headaches that it gives them." 
Still, the term stuck. And by the mid 1970s, newspapers in and around Philadelphia used it to refer to the start of holiday shopping.
And as reported by the Washington Post, the whole thing is pretty much a scam.
From an economists’ perspective, this is a case in which the retailers are using a rationing mechanism other than price to allocate scarce goods: They price a limited number of TVs and other products at a below-market price, and then ration those goods based on who is willing to stand in line the longest. Essentially, the buyers receiving the discounts are “paying” the store by standing in line for hours upon end, creating the sense of anticipation that in turn attracts the TV cameras and, the retailers hope, eventually a broader group of consumers who will pay the actual market price.
But it's a useful measure of the strength of the economy, right?

In fact, sales over Thanksgiving weekend tell us virtually nothing about retail sales for the full holiday season—let alone anything meaningful about the economy as a whole. Paul Dales of Capital Economics analyzed the relationship between retail sales during the week of Thanksgiving against the overall change in retail sales for November through January. As the chart shows, the relationship is a very weak one, with dots all over the grid. But if there is any conclusion to draw at all, the relationship is actually negative!

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