Local Communities Feel ‘No Free Lunch’ This Holiday Season

As economists say, “There’s no such thing as a free lunch.” Meaning, someone is always paying for it in some way.

And as the online shopping continues to click along this holiday season, it’s taking a toll on the local economies across the country.

Indeed, GDP is up (3.2 percent in the third quarter), and unemployment rates are are down, lower than 2014 levels. And, yes, many consumers are feeling confident, as the Consumer Confidence Index, which measures optimism of the U.S. economy, increased to 107.1 in November, from 100.8 in October — a nine-year high.

But while optimism is important, economists say those national numbers don’t perfectly translate to how local communities are feeling this holiday season. A new report out from the JPMorgan Chase Institute proves that the local communities across the country are feeling strained as the effects of consumer spending changes, specifically in the long term, not just the short-term holiday season.

The newest Local Consumer Commerce Index tracked the debit and credit card transactions of JPM Chase customers in 15 American cities. The index revealed a continuing slowdown in local spending over the past two years, namely with older generations, but thanks to younger ones (millennials), the slow wasn’t as dramatic. The index dropped nearly 2 percent from Aug. 2015 to August this year, with the bottom quintile of income bearing the load of the local spending.

Where are people spending their money? Not as much locally, apart from restaurants and services. They’re spending it online.

Retail purchases — across all generations and income levels — posted 2 percent growth, with online sales growing 15–19 percent.

Ultimately, what this means, according to Institute executives, is that, if something is not for sale online, it’s not doing well. And historically, that wasn’t necessarily the case prior to the popularity of online shopping.

The results trickle down to the local communities that not only feature the mom-and-pop storefronts but also the local Walmarts, Targets and other big-box stores that employ local people, who then, of course, purchase and interact in the local economy.

As for why the overarching sentiment that the country is doing better and the consumer confidence statistics are positive despite local troubles, Institute executives say it’s due to untrue election narratives and social media amplifying misperceptions. For example, the unemployment rate is high, but it’s not the highest, despite what people may be believing.

The good news, however, is that, at the same time, consumers are still not totally naive and indeed have concerns. According to one annual survey, nearly all American shoppers (93 percent) say there is at least one aspect of holiday shopping that they feel nervous or skeptical about. And a separate study by VitalSmarts reported that “eight out of 10 people either overspend or have a spouse or partner who overspends during the holiday season, and nearly 56 percent say it is difficult to discuss holiday spending with their spouse or partner or avoid bringing up their concerns altogether.”

So, perhaps some of that shopping and spending have some chance of staying local this holiday season.