The Corner

Economy & Business

“Creative Destruction at its Best”

The beat goes on…

The New York Times (my emphasis added):

Between 2010 and 2014, e-commerce grew by an average of $30 billion annually. Over the past three years, average annual growth has increased to $40 billion.

“That is the tipping point, right there,” said Barbara Denham, a senior economist at Reis, a real estate data and analytics firm. “It’s like the Doppler effect. The change is coming at you so fast, it feels like it is accelerating.”

This transformation is hollowing out suburban shopping malls, bankrupting longtime brands and leading to staggering job losses.

More workers in general merchandise stores have been laid off since October, about 89,000 Americans. That is more than all of the people employed in the United States coal industry, which President Trump championed during the campaign as a prime example of the workers who have been left behind in the economic recovery…

Store closures, meanwhile, are on pace this year to eclipse the number of stores that closed in the depths of the Great Recession of 2008…

The current torrent of closures comes as consumer confidence is strong and unemployment is low, suggesting that a permanent restructuring is underway, rather than a dip in the normal business cycle. In short, traditional retail may never recover.

Not to worry:

“This is creative destruction at its best,” said Mark Zandi, chief economist at Moody’s Analytics. “We are downsizing a part of the economy that is uncompetitive. While painful for those in the middle of it, this is how we grow and wealth is created.”

Creative destruction is a good theory – and it has proved itself in practice far better than the alternatives, but what if those “in the middle of it” are not prepared to wait for their share (an interesting issue in itself) of the wealth that this new wave of automation will hopefully create?

While…distribution centers could replace some of the work lost in stores, they likely won’t make up the entire difference. That is because much of the operations are automated and require different skills and sensibilities than selling jeans…

The job losses in retail could have unexpected social and political consequences, as huge numbers of low-wage retail employees become economically unhinged, just as manufacturing workers did in recent decades. About one out of every 10 Americans works in retail.

1:10

Under the circumstances, “unexpected” may be the best we can hope for.

Recommended

The Latest