Top Behavioral Economists On Black Friday
We all know Black Friday is the biggest, craziest spending day in the U.S. According to former White House economic advisor Matthew Slaughter, “Last year in the U.S. economy, consumer spending totaled a remarkable $11.5 trillion—fully 68.5% of total U.S. gross domestic product in 2013. Knowing what forces drive the spending habits of Americans on days like Black Friday can be critical for business success.”
To get an idea of what’s driving our behavior, we turned to some of our top experts on behavioral economics. Former chairman of the President’s Council of Economic Advisors, Alan Krueger, expects spending to increase this year as consumers have more disposable income with the price of gasoline below $3 a gallon—its lowest level in four years. “The improvement in the job market, with the unemployment rate hitting a six year low, should also make consumers feel more confident when it comes to holiday shopping. Consumer spending on discretionary items has been notably weak in this recovery, mainly because households took such a big hit to their wealth and job security, but I’m expecting that to turn around as the economy continues to strengthen.”
When do people buy things and when do they make spending decisions? What are the triggers and indicators in the economy? Why do we not only put up with this insanity, but consider it critical part of the holiday process?
According to Diane Swonk, the chief economist for Mesirow Financial, “Discounts and promotions will continue to determine where and when most consumers shop; this reflects the increased sophistication of shoppers. Millennials, in particular, watched families lose homes and wealth during the Great Recession, so they buy less and when they do spend, they make sure to find the best deals. Even so, more jobs and lower prices at the pump will fuel a significant 4.6% rise in holiday spending.”
These insights indicate that we should see a bigger Black Friday push this year than in recent past, and a bigger Black Friday could also inject enough confidence into organizations to get them hiring again and combating our unemployment rate. Meanwhile, Millennials’ spending trends are forcing retailers to evolve, but they are skittish about spending what they fear they may lose.
Doug Holtz-Eakin, the former director of the nonpartisan Congressional Budget Office and the former chief economist of the President’s Council of Economic Advisers, believes “The fundamental barrier to a faster economic recovery is the modest pace of household spending. It is important to policymakers, marketing departments, and production planners alike to instill in consumers the confidence to spend more rapidly; trusting that businesses are well-positioned to respond with a virtuous cycle of additional hiring and pay increases.”
Check out a list of our top economic experts, and see how their insights can help your organization navigate what’s to come.
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