From The Wall Street Journal:
U.S. lockdowns to contain the coronavirus pandemic prompted record monthly drops in retail spending and industrial output, as consumers pulled back sharply on shopping and eating out and factories suffered a sharp drop in demand.
The Commerce Department on Friday said retail sales, a measure of purchases at stores, at restaurants and online, fell a seasonally adjusted 16.4% in April from a month earlier. The drop eclipsed a revised 8.3% drop in March sales, and marked the steepest month-over-month decline in records dating to 1992.
The Federal Reserve separately said industrial production dropped 11.2% in April, its steepest monthly fall on records dating back more than a century, as the coronavirus response closed factories, sapped demand and froze supply chains.
“They’re just dramatically weak numbers,” said Jim O’Sullivan, an economist at TD Securities. “We’re obviously in this big hole now.” He said a key question is how long it takes to climb out of it, which depends in part on the speed of reopening.
Social distancing, business closures, travel restrictions and other disruptions that started in mid-March have taken a particularly heavy toll on retail stores and restaurants, many of which remain closed or are opening gradually as states begin to reopen their economies.
Consumer spending in April was down more than 20% from the same month last year, and certain categories posted dramatic declines. Clothing-store sales in April were nearly 90% lower than a year earlier, while sales at department stores, bars and restaurants, and sporting goods stores were all down nearly half. By contrast, sales were up over 20% on the year for online retailers and up 12% at food and beverage stores.
Lower vehicle sales and spending at bars and restaurants drove last month’s decline in retail sales, but nearly every other category suffered too as commuters worked from home and malls remained shut.
The exception were sales at nonstore retailers, a category that includes internet merchants such as Amazon.com Inc. and which grew 8.4% month-over-month.
. . . .
Sales were weak across a range of categories, but nonessential businesses were particularly hard hit. Sales at furniture stores dropped 58.7% and electronics fell 60.6%. Clothing sales plummeted 78.8% from March.
. . . .
Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output, and retail sales account for about a quarter of all consumer spending.
. . . .
Workers also are losing jobs in record numbers because of the coronavirus pandemic, another factor hitting consumer spending. And declining consumer sentiment has economists worried about how quickly people will return to spending, as the economy opens back up.
. . . .
Some retailers are also unlikely to weather the pandemic and face permanent closures.
“2020 is going to be a year of rebalancing,” said Under Armour Chief Executive Patrik Frisk during an earnings call Monday. The athletic-apparel retailer reported that about 80% of global business has been at a standstill since mid-March, and revenue may drop as much as 60% in the second quarter.
Retailers on both sides of the Atlantic are “trying to figure out how fast they can open and how fast the consumer is going to come back,” Mr. Frisk said.
Link to the rest at The Wall Street Journal (PG apologizes for the paywall, but hasn’t figured out a way around it.)
PG hasn’t seen any information from major business publications about Big Publishing, Barnes & Noble and other parts of the publishing establishment.
His guess, as mentioned previously on TPV, is that Barnes & Noble will experience a substantial financial impact and that its online business won’t be nearly large enough to materially offset the costs of cutting off its retail arm for an extended period of time.
At least some B&N stores located in malls will have problems if major mall tenants close and/or the foot traffic they generate is substantially diminished. If a mall shuts down, as many malls have done in the recent past, there is likely to be one fewer Barnes & Noble store in the vicinity.
A year from now, PG believes there will be substantially fewer Barnes & Noble stores than their were pre-corona. Ditto for a great many other physical bookstores. He suspects this is the type of major societal and financial upheaval that changes some habits and institutions on a permanent basis.
Unfortunately, PG believes a number of small traditional publishers won’t be able to reopen or will reopen with substantially reduced staff and much-reduced advances.
PG suspects that traditional publishing will see mixed results with bookstore declines offset to some extent by improved Amazon sales. It’s pure speculation on PG’s part, but he would guess that Amazon sales of ebooks from traditional publishing will have seen an uptick while the market share of hardcopy books may decline.
In the short run, an increased proportion of ebook sales, which involve no costs for warehousing, shipping or returns of unsold hardcopy books from physical bookstores may well increase the profit margins of traditional publishers even as, if PG is correct, gross sales revenues suffer steep declines.
Over a longer period of time, if readers under lockdown have sampled ebooks from Amazon or their local libraries to read on their own electronic devices (or devices purchased from Amazon for the purpose), PG suspects some proportion of this group will become permanent ebook aficionados.
It may be too much to expect, but PG would hope that those in traditional publishing with any business sense would put a stop to the childishly petulant attitude displayed toward Amazon by so many New York publishing drones and their associated literati. Absent Amazon or someone like Amazon, traditional publishing’s future would look a lot more like Barnes & Noble’s than is the present case.
PG predicts that, ten or twenty years from now, intelligent and informed individuals will have concluded that Amazon saved literature (and a bunch of jobs in the literature biz that don’t involve writing books) during this difficult time.
I haven’t kept up with the news, so I’ve been wondering if any publishers are starting to get a clue on ebooks. I haven’t yet seen a sign of it on Amazon — tradpub ebooks are still overpriced — but someone at these companies must have a survival instinct. I gather the comic book industry is managing to route around Diamond Distribution, which shut down a week or two after the the lockdowns began in March. I guess the idea of having just the one distributor finally became undeniably stupid? Perhaps price-gouging on ebooks will finally seem undeniably stupid to prose publishers.
With telecommuting, companies in general should now have a better grasp of how to handle employees working from home. This pandemic will prove a baptism by fire for those managers who previously focused on “butts in seats,” because they didn’t understand they should focus on productivity and results. Workplace advice columnists have been forever explaining to managers who write in that they need to focus on productivity, and let go of the idea that an out-of-sight employee MUST be goofing off.
However, there will still be inertia on the remote-work front because there’s still a lot of red tape surrounding telecommuters living in different states. There was an “Ask the Manager” question recently, where someone’s company rescinded the offer to let her work from another state, because of payroll and tax issues. And here’s a column about how New York is a special problem on its own.
Since so many publishers are New York-based, I’m not sure they can readily adapt to telecommuting, even if they do recognize that they need to.
Thanks for the link.
I knew ballplayers get dinged for income taxes in NY and California but regular folks?
That provision looks ripe for attack under the interstate commerce clause of the Constitution, especially by freelancers. Of course, a better solution is for the company to get out of NY.
Yes, the NY is special link is particularly interesting. One – somewhat chauvinistic – comment referred to telecommuting from outside the USA, which does raise the interesting idea of moving to Bermuda or a West Indian island for you winter sun, rather than Florida.
It’s a bit hard for Americans to complain about New York doing this when the USA does the same thing to its citizens when they work overseas, irrespective of the location of their employer. This is a pretty classic case of American Exceptionalism and when the USA gets to define who its citizens are – and includes people who have never even visited the country and have no loyalty to or relationship with the USA – it comes pretty close to racketeering.
Some examples?
US Federal tax law operates on the basis of legal residence of record and where the money ends up. Corporations are taxed when the money comes home.
As for controlling citizenship, they don’t do it particularly well: birth tourism and anchor babies are real. Few countries allow blanket birthright citizenship like the US does. To their credit, the system doesn’t allow for local born-non citizens like many other countries.
https://en.m.wikipedia.org/wiki/birthright_citizenship_in_the_united_states
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“Birthright citizenship in the United States is acquired automatically by virtue of a person’s birth within United States territory or because one or both of his or her parents is (or was) a US citizen. It contrasts with citizenship acquired in other ways, for example by naturalization.[1] Pursuant to the Fourteenth Amendment to the United States Constitution and the Immigration and Nationality Act (INA), U.S. citizenship is automatically granted to any person born within and subject to the jurisdiction of the United States (known as jus soli).[2] This includes the territories of Puerto Rico, the Marianas (Guam and the Northern Mariana Islands), and the U.S. Virgin Islands.[3][4] Birthright citizenship also applies to children born elsewhere in the world to U.S. citizens (with certain exceptions), known as jus sanguinis.
The policy stems from the Citizenship Clause of the Fourteenth Amendment to the United States Constitution, stating “[a]ll persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside”, and was meant to override the 1857 Dred Scott v. Sandford decision that denied African Americans citizenship.[5] The application of birthright citizenship to children of illegal immigrants remains controversial.[6] The Pew Hispanic Center estimates that approximately 7.5% of all births in the U.S. (about 300,000 births per year) are to unauthorized immigrants.[7] The Pew Hispanic Center also estimates that there are 4.5 million children who were born to unauthorized immigrants that received citizenship via birth in the United States, while the Migration Policy Institute estimates that there are 4.1 million children. Both estimates exclude anyone eighteen and older who might have benefited.[7][8]”
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And while the US doesn’t endorse dual citizenship tbey allow it for immigrants and they don’t object to other countries granting it.
Also, people who object to US authority can renounce their citizenship fairly easily. Quite a few do.
They just do things different but they have their reasons. Money grubbing is just a side effect. 😉
The prevailing theory of the left-ish party, for example, is that *not* raising taxes counts as a tax cut. A few years back they stated it publicly.
BTW, in the US Citizenship is distinct from Nationality.
The Immigration and Nationality Act of 1952 (INA) made a minor distinction between U.S. citizenship and U.S. nationality.[79] Citizenship comprises a larger set of privileges and rights for those persons that are U.S. citizens which is not afforded to individuals that are only U.S. nationals by virtue of their rights under the INA.[80] It is well-established that all U.S. citizens are U.S. nationals but not all U.S. nationals are U.S. citizens.[79]
https://en.m.wikipedia.org/wiki/citizenship_of_the_united_states
(Wikipedia links are acting weird lately.)
I’m not sure that renouncing US nationality is as easy as you imply. Some people can’t even afford the $2,350 fee, then there is the 3 to 6 months time taken to process the application, the need to prove tax compliance, plus the possibility of an exit tax.
All this may be reasonable for a “normal” US citizen (even though I think taxing the worldwide income of a non resident is not a good idea; does the USA really want to line up with Eritrea against the rest of the world?).
However, for “Accidental Americans” who essentially have no real connection with the USA, and quite probably have never known of their citizenship until it came back to bite them, the result is a nasty and expensive mess. Typically, they are not going to be tax compliant – not having known that the US considered them its nationals – and the IRS’s filing requirements are ludicrously burdensome even when earnings are not large enough to result in a US tax charge. Of course, most accidental americans who do know their status will try to fly under the radar as they don’t recognise the US’s right to treat them as US nationals nor the tax them in any way.
WordPress ate my reply to this. Let’s see if I can make a post this time.
I thought you might be objecting to the idea that automatic citizenship for the children of Americans who happen to be abroad at the time of the child’s birth. In that case, I strongly disagree. I don’t believe a government would be right to deny citizenship to the children of their soldiers, diplomats, or business people or students just because the parent was abroad at the time. This scenario is so commonplace, I couldn’t begin to count the Americans, including relatives, who were born on a military base in some other country. John McCain and Ted Cruz are the most famous examples I can think of.
However, it occurred to me that you might be thinking of the ranter in the comments of the New York link. The guy who wanted to tax foreign freelancers for American companies? He struck me as unhinged. It’s also highly unlikely his fantasies would come to pass. Case in point, I sometimes worked in Detroit, which is a city that taxes nonresidents who happen to work inside the city. I never lived in Detroit, so I was salty about this tax: no taxation without representation!
I heard an idea floated to have Detroit make other cities collect the Detroit tax from Detroit residents who worked outside the city. As far as I know, that idea never came to pass. I wouldn’t worry about the unhinged ranter’s fantasy becoming law.
On the subject of taxing Americans who work abroad, I never approved of that law on its face. I did wonder if there was a valid reason for the tax, which your post prompted me to look up. Per a 30-second search, I found a source that says the tax originated with the American Civil War. Apparently, some Americans fled abroad to escape conscription into the war, and the tax was designed to punish them. If true, this is an excellent example of why sunsetting certain laws would be a good idea.
Jamie, I’ve no objection to a right to citizenship for children of Americans who happen to be abroad at the time of the child’s birth. However, I’m not sure it should be automatic on both sides. The child should have an automatic right to US citizenship if they want it but this citizenship should not be imposed against the child’s will.
You refer to military and diplomatic personnel, but what about the American who marries a foreigner and permanently relocates to their spouse’s country? The child grows up as a citizen of that country and their only real connection to America is that they probably have American relatives. If the child intends to remain in their birth country but comes to the notice of the IRS, the US will want to subject them to a very burdensome and expensive tax system. Of course, they can just refuse to have any part in this but then they will be treated as second class citizens in their own country by financial organisations fearful of FACTA.
I think that the child may be able to relinquish* their US citizenship if they do so before age 18½, though I’m not sure what this would cost or what hoops they’ll have to jump through. This though is no help to “Accidental Americans” who only discover that that they are dual citizens at a later time.
When this has come up in conversation with my younger son’s American in-laws they find it difficult to conceive of people not wanting to be American citizens. I don’t know how general this attitude is, but they are first or second generation immigrants which may influence their view.
* as distinct from the renunciation process
Jamie, about your “WordPress ate my reply” comment.
I got two emails from The Passive Voice about you having commented, one of them seemingly the missing one. It clearly got far enough into the system to generate an automatic “someone has commented” email before it vanished. So I got to read both of your comments but chose to respond to the one that actually got published.
I long ago concluded that I should compose my comments in Word so I’d have a copy if the system lost them (plus composition and editing is easier). Somehow I never seem to actually stick to this system.
Cities taxing non-residents is a bone of contention all over.
A couple decades back, the Cleveland City council proposed a significant raise to the city income tax. The council president was selling it by emphasizing it would only impact suburbanites because in his view nobody living in the city had a taxable income. And, of course, suburbanites don’t get to vote in municipal elections. Not too surprising, then, that a fair amount of companies moved their headquarters out of town, to the surburbs.
Battles over taxing the productive aren’t limited to DC.
I haven’t kept up with the news, so I’ve been wondering if any publishers are starting to get a clue on ebooks.
Not only do they have a clue, they know it backwards and forwards. They know it so well, they know they have no competitive advantage in the market without paper. Their competitive advantage is making paper books and getting them to consumers better than anyone else.
With eBooks, they have no competitive advantage that is not derived from paper cross-promotion. They know they can continue to make very good money in a declining market if they manage the decline. That means they price and produce in a manner that keeps paper alive as long as possible.
They know they could sell lots more eBooks, and they know that means they will sell lots fewer paper books. Down that road lies disaster for them. They have far more clues than any of us have.
They are fortunate that enough authors still think of paper as the standard that makes them a real author. So, they have a supply of marketable manuscripts that exceeds their needs. That’s important because it means they don’t have to pay authors any more than 30% of revenues.
You can make a lot of money from a cash cow as it declines and finally dies. This means they don’t do what many authors want them to do. OK. It’s their money.
Small businesses whose capital reserves double as their retirement fund are going to be cutting their losses right and left. I am already seeing storefronts empty out in my neighborhood.
Everyone will eventually catch this thing. We can do that with a dead economy, or with a healthy economy. We all catch it in either case.
Publishing is one business that is made to order for telecommuting.
It’s all about communications, discussions, and document processing.
All you need is 90’s vintage laptops and a cloud services contract.
Well, that and a modicum of mental flexibility…