photo by John Schreiber.

Orange County retailers have a lot to look forward to as the holiday shopping season kicks off with Black Friday, but there are some red flags, too, according to a Chapman University professor.

“COVID is still keeping us busy in one way or another,” Raymond Sfeir, director of the A. Gary Anderson Center for Economic Research at Chapman University, told City News Service.

He noted recent shipping traffic jams due to an increase in e-commerce and supply chain issues.

“It’s all related to COVID, so its impact is not gone yet,” Sfeir said. “But we are much better off than last year.”

The most notable change, of course, is the availability of COVID vaccines this holiday season.

“So many people are vaccinated,” Sfeir said. “From that regard we are better off. A lot more people are traveling, a lot more are going to restaurants, to bars. So, it’s very different than 12 months ago.”

E-commerce is on the rise this year, but not to the extent it was last year, Sfeir said.

“I don’t think we’re going to have those huge increases we had before of 25 to 28% in online purchases,” he said. “The level is already so high that it cannot sustain very high, double-digit increases.”

Shopping online is “going to be more the norm now,” he said.

There’s good news in employment data, he said.

“In October we added 5.8 million jobs, compared to October of 2020,” Sfeir said. “That’s a sizable number. These are people receiving salaries and wages and they’re more prone to spending more. Wages are higher. The employment cost index is 4.6% higher than a year earlier.”

Workers are earning better benefits, he said.

“Then the economy as a whole is still growing,” he said. “We expect it to be higher in the fourth quarter. We expect it to continue to grow next year at a decent level. We’re forecasting 5.6 or 5.7% and 4.4% next year.”

Unlike last year under quarantine conditions, consumers are out more and spending, Sfeir said.

“Another indicator is credit card usage is up now compared to previous months,” Sfeir said. “That indicates to me the willingness of consumers to spend.”

On the other hand, he added, inflation is increasing.

“We have a much higher inflation rate — 6.2% in October. That’s high,” Sfeir said. “It hurts now because your money does not go as far. If people want to get the same number of gifts as before, the same quality, it’s going to cost a lot more than last year.”

The higher inflation rates are expected to carry over into 2022, he said.

“We disagree with what the Fed Reserve is saying,” he said. “We think the inflation rate will be on the high side.”

Sfeir said energy prices are rising, not just at the gas pump, but when consumers pay the bill to warm their homes during the winter.

The professor does not expect shoppers will have much trouble hunting down toys for their children this year.

“I think there’s so much merchandise in our stores,” he said. “I do not believe this is a major issue. There may be some items, some toys you cannot find, but that is not a big deal. You’ll find another toy for your child. It may affect particular products like not getting the toy you want, but it’s not a huge issue.”

Consumer confidence is slipping as shoppers worry about inflation, Sfeir said.

“They go to the supermarket and everything they buy is more expensive,” he said. “It gives them a bad taste. My feeling is the decrease is mostly because of their outlook on inflation. It’s much higher than they thought it would be.”

The federal government’s move to draw from its oil reserves to drive down gas prices “is not going to make much of a difference,” Sfeir said.

Orange County is “recuperating a little faster than the rest of the nation because we got hit harder than they did” by the pandemic, Sfeir said.

Orange County’s economy depends a great deal on tourism and the hospitality industries that serve it, he said.

“Last month in October we added 20,000 jobs compared to September,” Sfeir said. “That’s how much we added in all of 2019. It’s a very large number, and that’s because we were lagging way behind the nation before.”

The state added 94,000 payroll jobs — almost 17% or 18% of what the nation added, Sfeir said.

“Next year, our employment will grow at a faster rate than the rest of the nation,” he said.

Federal, state and local efforts to provide pandemic assistance will also spur more shopping, Sfeir said.

“All in all it’s going to be a good holiday season for everyone,” he said. “The retailers will be happy to make up for a previously slow market.”

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