Is Christmas a Big Deal for the Economy?

There’s a quaint old story that you may have heard before:

A wise man provides a valuable service to a king, and in return the king offers the wise man anything he can ask for. The wise man smiles and thanks the king for his magnanimity, but says he only asks that one single grain of wheat be placed on the first square of a chessboard, then two grains on the next square, and then three grains on the third square, and so on until the chessboard is filled up. The king shrugs at this odd request, but orders that it be so. As a meager portion of grain is placed on the first few squares everyone thinks the wise man has chosen foolishly. But as more and more spaces are filled with increasing numbers of grains it dawns on them that the quantity of wheat is more and more substantial. The wise man has, after all, gained a great boon in a surprising way!

 

This story illustrates how hard it can sometimes be to judge quantities. And the same difficulty arises with respect to the economic effect of various stimuli, including Christmas shopping. Here’s a clip from a recent news report from ABC News:

With only six days left before Christmas, holiday shoppers are flooding the malls and local stores. Nearly half of shoppers have not finished their Christmas shopping yet, and the traditional biggest shopping days — Black Friday, Cyber Monday, and Green Monday — are all behind us. The outlook seems to be that it’s shaping to be a robust season for the economy.

We’ve heard before that “holiday shopping” provides a big boost to the economy. I found one site that says it is “the largest economic stimulus” of all:

Christmas is typically the largest economic stimulus for many nations around the world as sales increase dramatically in almost all retail areas.

But just how big a deal is Christmas retail sales and the boost it gives to the economy? We get a pretty good answer from the Census Bureau’s report on Retail Sales. The link shows the source of the data, which is probably about as complete and accurate a tally as exists. My chart illustrates the trend for last year:

 

[Source: US Census Bureau]
[Source: US Census Bureau]
You can see the uptick there at the right edge of the chart — signalling the month of December. But does that really look like a big deal? December is the month with the highest total, but not by much. One of the sites I link above contends that the holiday shopping season accounts for nearly 20% of all US retail sales. That is true — if you define the holiday shopping season to include nearly 20% of the year and include all sales during that time as “holiday shopping.”

December sales were $371 billion, or 10.3% of the annual total. The monthly average was around $301 billion. The month with the lowest sales total is February, which is not surprising simply because it has only 28 days. If you consider that people eat food and brush their teeth and change their socks and replace lost umbrellas and damaged smartphones in December just as they do in every other month — and that most of the money they spend in December is spent on the same things they spend money on in every other month — it comes clear that the December boost is only about $69 billion or 1.9% of annual sales. That is a far cry from the exaggerated nearly 20% claimed by the news story.

I once had a heated argument with someone about the economic boost associated with hosting a Super Bowl. He insisted the effect was astounding because of all the people who would be eating food in restaurants and staying in hotels and riding in cabs and so forth. I agreed that those activities were all helpful spurs to economic activity. But I asked him, “Do you know another time when people eat at restaurants and stay in hotels and ride in cabs? Every single other day of the year!” He just wouldn’t hear it, and when I showed him numbers, he wouldn’t consider those either.

So, chalk up the hoopla about holiday shopping to another lazy, routinized news story. Remember that what really boosts an economy is ordinary people going about their ordinary lives. No government initiative or specially negotiated deal works as well as a fair system where everybody is working and paying and living and dying like normal. And is it asking too much to have them work and pay and live and die in a couple of decent rooms and a bath (and affordable health care and good public education)? Anyway, the datasaur doesn’t think so.

 

Christmas is a big deal, by the way, in terms of religious and cultural significance. My friend Mike Mercer at Internet Monk has the first perspective. A savior coming to Earth doesn’t happen every day! And here’s a brief taste of that trove of glorious Christmas music that, if you avoid malls and big box stores, more than balances the bad Christmas music.

 

I’m going to be singing this and several other wonderful songs at our church’s Christmas Eve service, under the guidance of our excellent director, Edward Atkinson.

 

So, Merry Christmas to all!

 

 

Harking back to my opening story, do you have any idea how much wheat the wise man accumulated by the time the chess board was filled? The answer is not what you expected unless you thought about it: only 2,080 grains!

You’ve probably heard the story, or some variation of it, in which the man gets an astounding amount due to compounding. But to accomplish that he would have needed to ask that the amount be doubled: 1, 2, 4, 8, 16, 32, 64, 128, etc. By the 64th square, that amounts to 9.2 raised to the 18th power. Ya gotta pay attention to detail!

 

All STEM jobs are STEM jobs

This week I discovered (and when I say “I discovered” I means “someone showed me”) a new site from the US Census Bureau containing data visualizations. These are info-graphics and interactive charts that make data come alive to the reader. Neat stuff.

Here’s one showing the crosswalk between college graduates and jobs in the workplace:

[Source: US Census Bureau]
[Source: US Census Bureau]

This is just a static illustration. If you go to this link you can see an interactive graphic that you can manipulate.

Explanation: The left half of the circle shows US college graduates from seven academic disciplines. These seven are not all the college majors. They are the ones that are commonly classified as STEM majors. Follow any color bar from the left side to the right side and you’ll see where graduates with that kind of degree fit into the job market.

You would expect that almost everybody with computer degrees would have computer jobs, almot everybody with engineering degrees would have engineering jobs, and so on. But the chart shows a very different reality. Only about half of computer graduates have computer-related jobs. Only about half of engineering graduates have engineering jobs. For all the other disciplines, the proportion who match degree with occupation is even less. The number of college graduates with degrees in the social sciences who subsequently find jobs in the social sciences is negligible.

Faced with something illogical, many people have an impulse to immediately offer an explanation or justification. I can hear people arguing, “But it is good to have people with different sorts of education working at all sorts of jobs. A sales manager with a psychology degree can manage customers and workers better because they studied psychology. A person with a civil engineering degree can do a great job serving clients at a social service agency because . . . . yeah.”

I cheerfully grant this. But it only half answers the question. Allowing that a psychology graduate brings some valuable ideas to whatever job he or she takes, oughtn’t we to also ponder what occupation-specific knowledge the psych degree has left out?  Isn’t there some social cost when a large part of our workforce is doing a job they didn’t prepare for?

There is one whopping problem with this chart, though. Can you spot it?

The problem is that only college graduates in the workplace are shown. One hundred percent of the left side is college graduates, sorted by degree. The right side of the circle is college graduates in the workforce. This creates the misleading impression that all jobs are connected to a college degree. But that is far from true, as I showed in an earlier post on this blog. The great majority of jobs in the 21st century US job market are menial and repetitive and do not require college degrees.

And this is a deliberate consequence of 20th century choices. Even as the popular rhetoric stressed the need for education, the workplace was made stupider. Skill and artistry was devalued. Consider, for example, the meat industry. (My apologies if you are a strong animal rights proponent or just one of those people who doesn’t like thinking about where food comes from.)

There used to be a profession called “butcher.” A butcher handled every step of the meat-production process. He (and back then it was always a he) killed the animal and cleaned the carcass. He aged the meat and cut it into appropriate portions. He made sausage and other products. He packaged and sold the meat over the counter. He worked slow and steady — preparing only as much meat as he knew he could sell, and preparing it to suit customers that he knew by name.

Today, instead of that, we have what you see in the illustration. A line of workers — mostly women — slicing hunks of meat as fast as they can. They have no idea where the animal came from or where the meat will go to be sold. A lot of what they make will go to waste, but they aren’t allowed to slow down. Some of these women have college degrees, but the job market doesn’t value that. It only values their fast fingers. And if those fast fingers gets caught in a slicing machine (which happens a whole lot!) then the rest of the person becomes expendable.

When people read about crippling injuries in the meat industry (It’s worse now than when Upton Sinclair wrote The Jungle), they tend to call for stronger safety regulations. But the solution is to end the large-scale meat industry altogether. Zero out jobs like those in the illustration. Put meat processing back into smaller local operations. If that means more people are needed to do the work, I say hooray. The US can’t seem to drive its unemployment rate below 5%, and we need more skilled domestic jobs. If it means meat will cost more, I say hooray again. It does a community more good when $10 is spent at a local business than when $5 is spent on a product made far away.

By the way, butchers have not completely gone the way of the dinosaur. There are still some here and there, doing meat the right way. Here’s a blog by a butcher in New York. And here’s the website of Moody Meats, a company with butcher shops throughout central Indiana. Moody does a great job.