What is the true state of our Economy?
I have always been an observer of current events locally and internationally. Have you noticed, especially lately, there appears to be a disconnect between what the media and experts say about the economy and what you observe in your everyday life? Are they expressing half truths or choosing what to share with the general public? If you are somewhat observant, then you will notice that something does not add up. Let me explain what I mean.
We are now two thirds through 2017. Interest rates are rising on both sides of the border (US and Canada). All the experts are unanimous to say that the economy is on the rise due to economic growth and job creation. The stock markets are hitting record highs almost on a weekly basis. Global economic growth drives corporate profits, which in turn drives stock prices. If this it true, then we should be headed towards prosperity, however from what I am seeing, it is not the case. Full-time well-paid jobs are being replaced by occasional and part-time jobs. Those full-time jobs that are created are not equivalent to the ones that were lost.
I could understand that we are witnessing a global economic change, and things that use to work a certain way are changing right in front of our eyes. Let me use the retail industry as an example. It is an industry that is rapidly changing, but not because of what experts are saying about the rise of ecommerce. Ecommerce has been around for quite sometime now. If we were 10 years ago, I would say that argument had some credibility. However, currently, there are so many websites out there attempting to sale you something, that it has become just another business opportunity, and an easy excuse by struggling retailers to explain their losses. Retailers that were late to adapt to the ecommerce reality are finding it difficult in making their websites profitable.
The Success of Simons Department Stores
Retail is changing for many reasons. In general, people shop more responsibly and are less impulsive to make that purchase. In addition, especially those large Department Stores which cost a fortune to operate, can not be sustained anymore within their old business model. The millennials are not looking to walk through a store like they would do at a mall. They are looking for a shopping experience, like you would find at an Apple Store. In their minds, if they just want a product, they will just buy it online and have it delivered to their home. No crowds, no hassels. However, I believe that Department Stores are not obsolete. They need to adapt to the new realities. The best example of this is the Canadian Retailer Simons. They are a clothing retailer from Quebec City. After years of operating only in Quebec City region, they opened a few stores in Montreal area, and waited years before expanding into other major cities in Canada. You could find their fascinating story here. They invested in their online business and made it sustainable before expanding. They also developed policies that integrate both the online and brick and mortar stores which make them today one of the heathiest clothing retailers in North America.
The retail industry is one example of what I call a disconnect between the media, experts and reality. The restaurant scene is a good way to gage if people have disposable income or not. I live in Montreal, Quebec, Canada so I will base this observation to this location. Just recently, the Montreal media reported that Montreal’s economy is doing great, the best it has been in years. Tourism is up to levels never seen since Expos 67 (1967), where we had a record tourism season. Consequently, as of July 2017, the hotel occupancy rate is steady at 88%. For those who do not know Montreal, at this time of year it is festival season: International Jazz Festival and Just for Laughs just to name a few. All this takes place in the downtown Montreal area. I work downtown, so I am there every day. I take walks every lunch time to stretch my legs. The amount of closed restaurants and commercial real estate for rent are incredible. At the Montreal Eaton Centre alone, as of August 2017, I would say close to 50% of the stores are for rent. You can say this is a downsizing of the malls phenomena that America in general are experiencing. True, but the number of stores on St-Catherine Street (main street in downtown Montreal) that are for rent is very alarming. I have made the same observation on other major commercials streets in Montreal such as St-Laurent and St-Denis Streets. You might say that there is no coorelation between the disposable income of people and this observation. However I think it is directly connected and that is barely brushed upon in mainstream local media. By having people with less disposable income, in turn affects local business in general, especially the small mom and pop shops. In my opinion, this tendency is an indication that the Montreal economy is not doing as well as what it is percieved.
The economy is not in a good place. It is not an issue only in Montreal, but I would say any major urban centre in North America. Experts may say it is and that we will not see its positive effects immediately. Meanwhile, the reality is that everything is more expensive. The salaries are either staying the same or diminishing. People are changing their lifestyle to make ends meet. By people changing their lifestyle, buying less products, it translates to businesses struggling to make sales and often causing them to downsize or even close. Despite what our governments and the media are saying, people have less disposable income and since it has been going on for awhile now, it is starting to hurt all businesses. Unless you are a seasoned investor, or be an entrepreneur in nature, the average working class person will be struggling for some years to come.
Do not be fooled, the governments know this, but choose not to discuss it. Instead of gloating about how marvelous they are, they should invest in the people to retrain them in emerging industries so that the people have hope and a dream of a better future. I believe this should be the governments focus and role.
I would like to thank you for taking the time to read my Editorial. I greatly appreciate it. Until next time, keep on smiling :)