Monthly Issue
From Home Furnishing Business
July 24,
2018 by HFBusiness Staff in Business Strategy, Industry 
Numerous contradictory studies have attempted to profile this very diverse generation. Some data identifies them as big spenders adding to their debt with lifestyle products and so-called life experiences. Other studies suggest they are one of the best savers of any generation at this age. But like all generations, it’s inaccurate to place blanket labels on a generation that spans almost 20 years.
Where most researchers and studies do concur is that many Millennials have been dealt an increasingly difficult economic hand. And a recent research paper by the Federal Reserve of St. Louis (the St. Louis Fed) titled “A Lost Generation? Long-Lasting Wealth Impacts of the Great Recession on Young Families” paints at times a rather bleak picture. Those entering the workforce in and after the Great Recession, found a tight job market. Most entered colleges and many stayed for post degrees as the poor economy continued. Many also racked up mountains of student loan debt. Millennials tended to delay life events, like marriage and childbirth, and flocked to the inner city urban areas closer to the jobs they took but did not really choose. Tight credit and high debt made home buying out of reach and rents were high and apartments small. Many do in fact value life experiences over material possessions. All of this has left the home furnishings industry perplexed in its efforts to attract this mass of consumers.
Financial data is emerging which suggests there are three distinct segments to the Millennials based on their proximity to the Great Recession – (1) those that graduated college or entered the job market prior to the Great Recession, (2) those that entered the job market during the recession or during the post-recession high-unemployment recovery period, and (3) those entering after the economy was on its way to recovery (Figure 1).
Education
Those that entered the job market early, prior to the Recession, have definitely fared better than their younger Millennials. The second group hit a job market wall during the Great Recession and many have yet to recover as they took jobs unrelated to their college education at lower salaries. With the tightening of the job market, Millennials turned to colleges, becoming the most educated generation in history.
As Table A shows, 29 percent of Millennial men and 36 percent of Millennial women completed at least a bachelor’s degree compared to just 15 percent of men and 9 percent of women 50 years ago. While the percentage has increased for both sexes with each generation, women now exceed men as college graduates by 7 percent.
Some Millennials aren’t sure how much that education has helped them. The National Association of Colleges and Employers (NACE) tracks starting salaries by year of graduation and finds that 2004 through 2007, those early graduates averaged starting salaries of $42,619. Salaries in the second group graduating during the Great Recession and partial recovery, 2008 to 2011, averaged $41,607. But as the recovery has moved forward, 2012 to 2016 (most current data), starting salaries jumped to an average of $48,169.
The Financial Picture
Income in all generations was negatively impacted by the Recession, especially among Millennials and Gen Xers. The overall population of 25 to 34 year olds has not fared as well as the college graduates nor have they fared as well as the older Gen Xers aged 35 to 44 in terms of salary loss (Table C). At $34,067, median income for Millennials has yet to surpass 25 to 34 year olds in 1974 ($34,601 in real adjusted 2016 dollars). Meanwhile 35 to 44-year-old’s median income was not hit quite as hard in the Recession and at $42,012 in 2016 is nearly back to the median income in 2000.
The increasing salaries don’t look too bad one would think, but that’s only part of the picture. Millennials are overwhelmed by debt. According to the Federal Reserve, the average student loan debt for Class of 2017 graduates was $39,400, up six percent from the previous year.
Americans owe over $1.48 trillion in student loan debt spread out among about 44 million borrowers. That’s about $620 billion more than the total U.S. credit card debt, according to the Federal Reserve.
The real financial picture of Millennials and student debt lies in their net worth defined as assets minus liabilities. As shown in Table D, the average net worth for a Millennial just out of college at age 23 is negative $33,984. Even with an average starting salary of $52,569 it takes many millennials a long time to crawl out of student loan debt.
Despite their lack of disposable income, data suggests that Millennials do save more than other generations at the same ages. Most likely due to years of economic instability, Millennials coming into the workforce during the Great Recession and post-recession high unemployment years 2008 to 2012 are the biggest savers among the generations reaching a 6.1% average annual savings rate for 2009 graduates and peaking at 7.6% for those graduating college in 2012. Those graduated prior to the recession show the lowest savings rates, while Millennials starting job employment in 2013 or later range in savings between 4.8 percent and 5.1 percent (Table E).
Employment
Being such a large generation Millennials are starting to make their imprint on the workforce. Employed Millennial workers ages 25 to 34 are growing in number and now surpass the number of employed 35 to 44 Gen Xers. At 34.4 million post-college employed workers in 2017, Millennials are now 7.8 percent higher than Generation X in the amount of people in the workforce (Figure 2).
Although Millennials now have the most employees in the workforce, they still lead the way with higher unemployment rates (Figure 3). 4.6 million 25 to 34 year olds are unemployed compared to 3.5 million 35 to 44 year olds and 3.2 million 45 to 54 year olds.
Table F shows the impact and importance of education for the Millennials as it pertains to employment. While each category felt the effects of the Great Recession on the unemployment rate, those with a bachelor’s degree or higher spiked up to 4.9 percent in January of 2010 before leveling out to 2.5 percent in 2017 – just 0.4 percentage points shy of the rate in January 2007.
The percent of Millennials 25 to 34 who are “not in the labor force”, mostly
students and others who are neither working nor seeking work past college age, is in line with Generation X (Figure 4). At 21.8 percent, the older Millennials not in the labor force are only slightly higher then the 20.9 percent designated to 35 to 44 year olds (younger Gen Xers). However, keep in mind that many more Gen Xers are couples where one has chosen to stay at home to care for children while the other is employed.
It’s no secret that Millennials are delaying marriage and children. And the majority of Millennials are not yet married. The estimated median age at first marriage has climbed up each year for both men and women. As shown in Figure 5, the median age of men getting married for the first time has moved from 26.8 in 2000 to 29.5 in 2017 – an increase of 10.1 percent, while the median age for women has increased 9.1 percent over the same time period, up to 27.4.
It’s often difficult for most people to keep in their heads just exactly where the generations will be in their life cycles over time. The table below shows that even with all of the hype about Millennials, the glut of this generation won’t be fully felt within the home furnishings industry for possibly 10 years as they balloon into their prime furniture purchasing years of 35 to 54 (Figure 6). The leading edge is coming in now. Meanwhile, the here and now are the Gen Xers.
Many families suffered severe setbacks as a result of the Great Recession especially in their prime earning years. Gen Xers have been able to regain most of that financial loss, but it seems Millennials have fallen further behind. In fact, the Millennials of the 1980s was the only 10-year cohort studied by the St. Louis Fed to worsen from 2010 to 2016. And the outlook going forward is not rosy.
One explanation by the earlier referenced St. Louis Fed’s “Lost Generation” essay is that individuals and families whose heads were born in the 1980s (Millennials) are different. “They generally were too young to be homeowners during the housing bubble. The predominant type of debt they owe is non-mortgage debt, including student loans, auto loans and credit card debt. Because none of these types of debt finance assets that have appreciated rapidly during the last few years—such as stocks and real estate—they have received no leveraged wealth boost like that enjoyed by older cohorts.”
But three factors are on the side of Millennials – time, education, and numbers. Time implies that these Millennials have many years to garner wealth and may not follow the same path as other generations. The second is that they are the most educated generation, and while expensive, can be extremely important going forward to wealth collection. And the third is sheer numbers. The Millennials (and Gen Xers) are now the largest voting bloc compared to the Baby Boomers, yet they have historically had low turnout at the polls. But as they mature, this trend will likely reverse and they will begin to politically chart their own course. One thing is certain, Generation Z right behind them is very politically confident and may give the Millennials the push they need.
July 12,
2018 by HFBusiness Staff in Business Strategy, Industry
Fewer homes are being built per household than at almost any time in U.S. history and home construction per household, a decade after the recession bust, remains the lowest level in 60 years of record-keeping. Adding fuel to the flame, the housing industry is not able to provide the work/lifestyle preferences of ballooning Millennial households nor affordable housing to first-time home buyers.
Table A shows the key economic indicators since 2010 when the recovery from the recession began in full swing. Since that time, the furniture industry has been consistent, averaging around 4.7 percent growth. And while the growth in housing starts appears stronger on paper compared to the lackluster growth in new household formations, the actual numbers are about the same, 6.2 million units each over the last five years, not enough to keep up with demand (Figure 1). Building shows signs of picking up based on first quarter starts this year (up 9.3 percent), but economists say this will do little to ease the crisis in many cities.
The most critical result of the lack of new housing starts is falling housing inventories which in turn drive up prices (Table B). The number of rentals and homes for sale has been falling consistently since coming out of the recession when inventories were high. During the four-year period 2010 to 2014, rental inventories fell at an annual rate (CAGR) of 7.5 percent and housing for-sale inventories declined 10.2 percent. During the following three years, 2014 to 2017, rentals and housing inventories fell again but at a smaller annual rate of 0.4 percent and 4.8 percent respectively. This year, based on an annualized first quarter, rental inventories are down another 3.4 percent and houses for sale have declined 7.2 percent.
As shown in Table C, home prices have increased dramatically since the bottom of the recession in 2009 – jumping 46.1 percent from 2009 to 2018. With a current median home price of $328,000 (2018 April YTD), prices are 34.1 percent above the pre-recession peak of $244,950 in 2007. Since 2010, home price increases are averaging 5 percent a year (CAGR). Paired with ballooning home prices, stricter lending polices are keeping many first-time buyers out of the market.
As inventory stays low, prices will continue to go up due to many builders turning away from starter and mid-priced home and choosing to build high-end homes with better profit margins.
Numerous factors have converged to create the housing shortage, one of which is the lack of construction labor. Due to a combination of many workers leaving the industry during the recession, fewer people attending trade schools and a decline in immigrants and undocumented workers, builders struggle to find workers. The amount of construction workers in residential construction fell 44.8 percent from 2006 to 2011, losing almost half of the total workers (Table D). The industry has slowly gained employees back since 2011, increasing by 39.6 percent in seven years, but is still 23 percent shy of the one million construction workers in 2006.
Along with the labor shortages, high land costs in desirable living areas are impacting the ability to build affordable housing. Younger people are unwilling to deal with long commutes and choosing to live close to work. They also seek the lifestyle of more urban living and access to services it provides. Unfortunately, there is a mismatch between affordable/available places to build and where people want to live.
A study by the Cato Institute last October points to what the report considers the main contributor to the housing problem. The report says, “Local zoning and land-use regulations have increased substantially over the decades. These constraints on land development within cities and suburbs aim to achieve various safety, environmental, and aesthetic goals. But the regulations have also tended to reduce the supply of housing, including multifamily and low-income housing. With reduced supply, many U.S. cities suffer from housing affordability problems.”
Many economists also point to the abuse of government land-use regulations and building permit delays to keep away new building in desirable cities. High regulatory costs, delays, and opposition from neighboring homeowners make it difficult for new multi-family housing to be built in many urban areas.
The “not in my backyard” or NIMBY sentiment prevalent in urban areas used to be a problem faced solely by big cities, but the rising rents, displacement and unwillingness to restructure is spreading to middle-size cities.
According to the Cato study, the best solution to the housing shortage and the affordability problem is an easing of regulatory zoning and building constraints by local governments. But homeowners say this poses an undue tax burden as existing residents who must then belly up for the increased costs for traffic solutions, infrastructure expansions, more schools, etc. Therefore the U.S. continues to segment geographically according to income.
The improving economy with rising wages and low unemployment should be impacting the furniture industry more positively than sales are reflecting. But the housing shortage and rising rent and home prices could be the thing holding the industry back from the high growth many have long been predicting.
June 14,
2018 by HFBusiness Staff in Economic News, Industry
The rise of e-commerce in the furniture industry continues its momentum as many brick and mortar stores search for strategies to compete with giant online retailers. And while many brick and mortar furniture retailers are strengthening their digital presence, their online furniture sales only account for 1 percent of e-commerce furniture totals. Meanwhile, furniture and home furnishings e-commerce retailers celebrate rapidly increasing sales, but struggle with how to become profitable.
It is estimated that 2017 Internet sales of furniture alone from both brick and mortar and pure e-commerce retailers totaled an estimated $19.7 billion or 18.8 percent of the total industry. This article picks up from Statistically Speaking’s August 2016 article The Rise of E-commerce in the Furniture Industry.
Sources: U.S. Census Bureau’s Annual Survey of Retail Trade (e-commerce) and Impact Consulting Services, Inc.’s proprietary FurnitureCore.com Industry Model.
Furniture Industry Sales
The retail furniture industry reached $105.2 billion last year, a growth of 3.9 percent over 2016 (Figure 1).
Of the $105.2 billion industry total, sales can be distributed between (1) brick and mortar stores, (2) e-commerce retailers plus e-commerce sales by brick and mortar companies, and (3) mail order houses. Pure e-commerce retailers are those that do not have physical store locations, like Amazon or Wayfair, or their e-commerce is operated as a separate business unit, like Walmart.com. Additional e-commerce sales from brick and mortar stores total only 1 percent of the total industry.
Last year furniture and bedding sales by brick and mortar stores (non Internet) totaled $83.1 billion compared to $19.7 billion e-commerce (all outlet types), and $2.3 billion from mail order houses (Table A).
As shown in Table B, e-commerce continues to gain a greater share of the furniture industry – jumping from 5.1 percent of sales in 2006 to 18.8 percent in 2017. Meanwhile, brick and mortar share of total sales fell from a 92.2 percent share to 79.0 percent – decreasing dramatically as the economy improved after 2009.
The total furniture and bedding industry grew 3.9 percent last year. It is estimated that brick and mortar store sales of furniture grew only 2 percent while e-commerce retailer sales grew 12.9 percent.
Over the course of seven years since the bottom of the recession in 2009 furniture sales through e-commerce have grown at an annual rate (CAGR) of 22.2 percent compared to brick and mortar retailers at 3.0 percent. Total industry sales have grown at an annual rate of 5.1 percent (Figure 2).
Table C shows the annual year-over-year growth of the three outlet types. Note that the rate of e-commerce sales peaked at 26 percent in 2015, but has slowed somewhat over the last two years to 12.9 percent in 2017. Meanwhile, brick and mortar sales have struggled to reach 2 percent growth over the last two years.
Along with furniture e-commerce sales, other home furnishing products – floor covering, window treatments and home accessories – have grown at an even faster pace and surpass furniture in online sales. Consumers are still finding it easier and less daunting to buy home furnishings online without seeing or touching them in a store. Table D shows that while furniture e-commerce sales have grown from over 300 percent since 2009 (bottom of the recession) totaling $19.7 billion last year, home furnishings have grown 489 percent to $27.7 billion in 2017.
Brick and Mortar Stores e-commerce
In many brick and mortar stores, consumers have the option of physically visiting the store and/or using the store’s website to shop and make purchases. The online capabilities and offerings vary by retailer. Although “showrooming,” the customer’s act of checking out an item at a mall, brick and mortar or big-box store, then heading out to buy it from an online retailer, has grown commonplace over the years, the reverse is also true. Many consumers still need to see, touch, and feel an item and will do online research before heading out to a store to make a final purchase. While the success of online retailing among brick and mortar merchants has increased over the years, the e-commerce sales comparison remains vast between brick and mortar stores and pure e-commerce retailers. E-commerce sales among combined furniture and home furnishings stores jumped 200 percent from $367 million to $1.1 billion 2006 to 2016 but furniture stores only held one percent of that volume. (Note: 2017 data has not yet been released.)
Comparing combined furniture and home furnishings stores to other retail brick and mortar companies, furniture and home furnishings stores lag behind in percent of e-commerce sales to total sales but has shown 25 percent growth from 2014 to 2016. Just reaching 3.0 percent in 2016, clothing and clothing accessories stores have the highest volume of e-commerce sales as a percent of total sales among brick and mortar retail store types (Table E).
Mail Order Retailers
Technically the mail order business is a small part of the furniture industry but the lines between mail order and e-commerce are blurring and print catalogs are making somewhat of a comeback as another medium to reach out and touch the consumer. Data from the Census Bureau and Impact Consulting’s FurnitureCore.com Industry Model estimates the furniture mail order business at $2.3 billion in 2017, only 2.2 percent of industry sales. These sales were flat compared to the previous year. And according to the U.S. Postal Service and research by Data & Marketing Assn., in 2016, consumers are getting fewer catalogs in the mail compared to the glory days. In 2016 9.8 billion catalogs of all types reached American mailboxes compared to double that amount in 2007 (Table F).
Despite the gloomy statistics, last year saw evidence that print catalogs are resurging but not in traditional mail order formats. For example, home furnishings e-commerce giant Wayfair produced its first print catalog at the end of 2016 and continues to roll them out. Wayfair claims its catalogs are meant to inspire a lifestyle as opposed to promoting a brand.
Research points to several reasons print catalogs are growing. First, consumers are getting less and less mail overall as the “paperless” movement has become popular and therefore catalogs now stand out in consumer mailboxes. Also, the advertising clutter in email boxes along with saturation in social media has driven companies to give the old fashioned catalog another look. Plus, software ad blockers are causing fewer marketing messages to actually reach the consumer. And finally, research by Data & Marketing Assn. suggests simply that Millennials really do like them.
E-commerce Retailers
E-commerce retailers are defined as companies without physical stores competing with brick and mortar establishments. Sales of combined furniture and home furnishings through e-commerce retailers have increased from $7.9 billion in 2006 to an estimated $46.3 billion in 11 years (2006 to 2017) – a growth of 486 percent (Table G).
Growing at an average annual rate (CAGR) of 17.4 percent a year, e-commerce furniture and home furnishings retailers show no signs of slowing down. The two giants in the industry, Amazon and Wayfair, are both looking at ways to incorporate brick and mortar stores into their portfolios. These companies see the desire held by a majority of consumers to see especially higher ticket furniture items in person before making the leap to buy. Along with Wayfair’s entry into the print catalog business, according to Boston Magazine, the company is looking to open its first showroom in an old Marshall’s storefront in downtown Boston. Rather than resist the looming presence of Amazon, mattress manufacturer Tuft & Needle has partnered with the online company to expand its brick and mortar stores using Amazon technology and selling various Amazon products in the stores. These moves could put more stress on traditional furniture retailers.
In addition to furniture and home furnishings, other consumer merchandise lines dramatically increased sales through e-commerce retailers. At $59.1 billion in sales, clothing/footwear leads e-commerce retailer sales in 2016 up from $12.9 billion in 2006 – skyrocketing 358 percent. Although not as high as clothing/footwear, furniture and home furnishings experienced the highest growth among e-commerce retailers over two years 2014 to 2016 – jumping 54 percent. Sporting goods sold through e-commerce retailers also continue a positive trajectory, increasing 44 percent in two years and passing the slower growing computer hardware merchandise line (Table H). Note that data for 2017 is not yet available.
Retail Trade Total
Internet sales of all consumer products from all retail types of outlets, whether brick and mortar or e-commerce companies, are estimated to have reached $437.5 billion in 2017 (Table I). It may be surprising to some, however, that these internet sales represent only 8.6 percent of all retail sales for all consumer products (Table J). But Internet purchases continue to make major inroads into many consumer products with no sign of slowing down.
The rapid growth of furniture industry sales by successful e-commerce retailers are challenging brick and mortar stores, but traditional store fronts still offer a customer experience that an e-commerce retailer cannot. But e-commerce companies are quickly moving into areas (for example, store fronts and print catalogs) to challenge the customer experience of traditional brick and mortar retailer.
Understanding the Role Geography Plays
Research is emerging to help both brick and mortar stores and online retailers better target customers. For example, the affluent urban customer has totally embraced the e-commerce experience.
However, in more rural areas where shipping costs are higher and delivery times longer, e-commerce has been slower to catch on. It also appears the less affluent consumer responds better to online sales events. Understanding these economic and geographical profiles will be a feature in a future Statistically Speaking article.
May 10,
2018 by HFBusiness Staff in Economic News, Industry
The brick and mortar home furnishings industry is not immune to the worker shortage crisis facing American businesses. Data from the Bureau of Labor Statistics supports the growing need facing companies to attract and retain employees, while adapting their training methods and introducing technology that fills the gap of a smaller workforce.
Successful companies are also looking at ways for technology to enhance the customer experience. Conversational “Live Chat” options are now widespread for online retailers. But technology is also creeping on to the sales floor. For example, home improvement retailers Lowe’s and Home Depot already have apps that can direct you within their stores to the exact location of a product. In addition, for the past year and a half Lowe’s has tested its second generation in-store robot fleet in the San Francisco area to assist customers as they walk in the door. The robots answer questions, are bilingual, and can physically guide a customer to a specific product. Lowe’s claims the robots are not meant to replace the human worker, but rather assist with the more mundane sales information functions leaving more complex questions to the sales personnel.
Labor shortages throughout the U.S. are fast becoming a real issue across all major industries. From farms to factories, employers are having a hard time finding both unskilled and skilled workers. In healthcare, hospitality, and retail industries, companies are struggling to find qualified and available employees.
According to the latest data, the U.S. has 6.3 million job openings and 6.7 million unemployed workers (Table A). In many cases, the skill sets required for the job and/or the wages required by the worker for these open positions do not match with the available unemployed labor force pool in the required geographic area.
Job Openings by Industry
Accommodation (hospitality) and food services is the hardest hit industry with 5.5 percent job vacancy – increasing from 4.6 percent last year (Table B). According to the World Travel and Tourism Council, tourism accounts for over 14 million jobs in the United States and a continued rise in job openings could impede economic growth for the hospitality sector.
Healthcare and social assistance had 1.03 million jobs open in January 2018, the most of any sector, and was among the highest with an open job rate of five percent. Job openings among transportation, warehousing, and utilities jumped 63.1 percent over a year – from 187,000 to 305,000. Retail trade, which includes all furniture and home furnishing stores, had 711,000 jobs opens and a job opening rate of 4.3 percent– up 28.6 percent from the same period last year.
Table C shows the five industries with the lowest rate of job openings. Government jobs – Federal, State, and Local – had the lowest rate of job openings at 2.1 percent. With rates under 4 percent (3.5 percent and 3.1 percent), job vacancies among Construction and Educational Services still rose 57.2 percent and 42.9 percent respectively from 2017 to 2018.
With 711,000 job openings in January, Retail Trade is struggling to hire and keep sales people. This accounts for 11.3 percent of total job openings – up from 10.2 percent last year. Both Healthcare and Social Assistance and Professional and Business Services make up 34 percent of all job openings – a total of 2.1 million jobs. 12.7 percent of job openings in 2018 (Jan) belong to the Hospitality industry (Accommodation and Food Services) as shown in Table D.
Job Openings by Region
While the South leads the way in total job openings (2.2 million), openings in the Midwest soared in one year to a rate of 4.6 percent – up from 3.7 percent (Table E). As many farms struggle to find workers, job openings in the West jumped 26 percent to 1.5 million jobs from 2017 to 2018 and finished January with a rate of 4.3 percent, while the Northeast has both the lowest rate (3.6 percent) and number of vacancies (1 million).
Civilian Labor Force
The Civilian Labor Force includes persons employed and those unemployed, but actively looking for work. Down 3.2 percentage points from 2006, the current work force (February 2018) makes up 63 percent of the total civilian population over the age of 16 (Table F). Roughly 37 percent of the population over 16 is not considered part of the labor force. This segment – Not in the Labor Force – consists of people who are in school and do not work, those who have grown disillusioned searching for work and not actively looking, and those who choose not to work for various reasons.
As shown in Table G, the unemployment rate has dropped to 4.1 percent in February of this year – the lowest since 2000. Unfortunately, this has not translated into big gains for the employed population. At 63.0 percent, the percent of the population employed continues to stay well below pre-recession levels, while people not in the labor force climbs further, growing 3.2 percentage points from 2006 to 2018 (February).
The labor force historically includes teenagers, ages 16 to 19, as they make up a large portion of the part-time labor market. This year, ages 16 to 19 account for 6.5 percent of the total civilian population over the age of 16, but only 3.7 percent of the workforce. In addition to an unemployment rate of 14.4 percent among teens, many are opting out of summer jobs and represent 11.3 percent of the total persons “not in the labor force.” According to the Bureau of Labor Statistics, teenagers opting out of summer work is not due to laziness, but rather education taking its place. In addition to many school districts either lengthening the school day or academic year, many students are taking summer classes to “get ahead “ – cutting into time for a job.
Not in the Labor Force
Of the 37 percent of the civilian population over age 16 that are not in the labor force, only 5.4 percent actually want a job, but are just not actively looking for one (Table I). This figure represents 5.2 million Americans, down from 6.6 million in 2012, that want a job, but are not in the workforce.
The number of men not in the labor force as a percent of the total labor force has slowly increased over the last decade and beyond. In 2006, only 37.9 percent of those not in the labor force were men. Since then, the number has grown yearly – up to 40.3 percent in February (2018). Conversely, the number of Women as a percent of those not in the labor force is declining. They represent 59.7 percent of those not in the labor force, down from 62.1 percent in 2006. Table J depicts how the percent of the civilian population not in the labor force by sex has shifted over time.
Adding to the worker shortage is that the desire for a job is falling as those not in the labor force keeps climbing. Table K shows the percent of people not in the labor force but still would like a job fell 6.6 percent last year, with women growing slightly more interested in working than men.
With many companies having a difficult time finding qualified employees, real concern is growing over worker shortage. Many older workers are retiring or choosing not to work and there are less young, not as qualified, workers to replace them. As a remedy, some industries are turning to robots, automation, and artificial intelligence to adapt to labor shortages. Through education, training, and pairing human skills with technology, companies may find ways to cope with a smaller labor force.
April 11,
2018 by HFBusiness Staff in Business Strategy, Economic News, Industry
Despite uncertainties over U.S. trade policies (see box insert), imports of household furniture continue to grow in double digits. In 2017, imports of household furniture rose 10.7 percent compared to only 3.8 percent growth in retail sales.
The Great Recession, 2007 to 2009, brought with it a major collapse in international trade – deeply affecting both imports and exports of household furniture. In recent years, growing wages, higher employment, a boost in consumer confidence and a healthy housing market have propelled import growth. Meanwhile, exports have struggled to maintain the initial post-recession climb. This article picks up from Statistically Speaking’s October 2015 article Imports on Upswing.
In 2017 the U.S. ran a $569 billion dollar trade deficit in all goods and services. Household furniture products at $30.7 billion in imports versus only $3.2 billion in exports represented only 3.4 percent of that deficit. Most astonishing, however, is that for all U.S. goods, the ratio of imports to exports was 1.5 while the ratio for furniture products was 9.7, almost 10 to 1 (Figure 1).
World dollar totals of household furniture imports have nearly doubled from $15.58 billion in 2009 to $30.74 billion in 2017 – increasing an average of nine percent a year (Table A). Already just a fraction of U.S imports, U.S. exports of household furniture have failed to continue the upswing experienced from 2009 to 2015 when it jumped over $1 billion. Over the last two years (2015 to 2017) exports have declined by -7.1 percent down to $3.15 billion.
Furniture Imports by Country
Over 200 countries export furniture into the U.S. but only nine represent over 90 percent of the total value coming into this country. China’s furniture exports alone have grown to roughly 60 percent of total U.S. imports – up 19.3 percentage points from 2002 to 2017. China has retained its hold on U.S. Imports through the recession. Since the peak of the recession in 2009, the value of imports from China has grown 98.8 percent to $18 billion (Table B).
Reversing dramatically over the previous decade, Canada’s decline alongside Vietnam’s rise still continues from 2009 to 2017. Vietnam has jumped from 0.5 percent of total U.S. imports in 2002 to 13 percent in 2017, while Canada has plummeted from 18.3 percent to 5.6 percent in the same 15 year period. Canada’s value of imported furniture fell 30.4 percent 2002 to 2017. Mexico has lessened its share of U.S. imports slightly since 2015 – down 0.6 percentage points to 4.5 percent in 2017, but the value of imports has increased by 3 percent to $1.4 billion (Table B and Figure 2).
Of the top countries, Vietnam had the highest growth in furniture exports to the U.S. last year increasing 16.1 percent in dollar value. In the last 15 years Vietnam has come out of nowhere to be the second largest exporter of furniture to the U.S. behind China (Figure 2).
Major Furniture Imports by Material Type
Methodology: Household furniture imports and exports are compiled by the U.S. Census Bureau Foreign Trade Division from more than 200 countries by product type and material.
Wood furniture imports have always been king but are now feeling the pressure from upholstery and metal. It has only been in the past two years that wood imports surpassed pre-recession import levels. But at $11.8 billion in 2017, wood products are still the largest material category among furniture imports but have receded to 38.5 percent of total furniture imports in 2017 – down from 56.5 percent in 2002 (Table C). Conversely both upholstery and metal have been increasing at a high rate, and combined, now account for almost 50 percent (49.2 percent) of all imports as shown in Figure 3.
Purchases of upholstery and metal household furniture from around the world have increased more than 68 percent since 2007. Although it is the smallest imported product category, bedding has catapulted since 2002 – increasing over 2,000 percent. Reaching $1 billion in 2017, imports of mattresses have grown 51.8 percent in just a year. Much of this increase can be attributed to adjustable bed bases and mattresses of cellular rubber or plastics (Figure 3).
Wood household furniture imports totaled $11.8 billion in 2017 and are up 9 percent over the previous year. At a 38 percent share of wood furniture imports in 2017, China still owns the wood category at $4.5 billion, but has lost significant share to Vietnam. Vietnam has grown from less than 1 percent of wood furniture imports to over 25 percent from 2002 to 2017. Canada, once a major player in wood furniture, has fallen to only 6.7 percent of the total. Malaysia and Indonesia continue their steady wood niches but control less than 6 percent of wood imports each (Table D).
Unlike the wood category, China has very little competition in upholstered goods in the international marketplace (Table E). Although not producing as high a market share, Vietnam has also made great strides in upholstery – growing from $7 million in 2002 to $700 million in 2017 and having a one year increase of 51.2 percent from 2016 to 2017. Once a major player, Italy was the leading exporter of upholstery to the U.S. until 2003 when China surpassed them. Once importing 28 percent of upholstered furniture, now the U.S. imports only 3 percent from Italy.
Even more so than upholstery, China dominates the market in imported metal household furniture with 75 percent market share. China increased from $1.7 billion in 2002 to $5.6 billion in 2017 – a jump of 225 percent in 15 years (Table F). While imports from Canada have grown since the bottom of the recession in 2009, it continues to lose market share to China. Imports from both Mexico and Taiwan have decreased since 2015, but Vietnam has maintained an annual average increase of 38 percent.
Exports by Country
As previously detailed, the U.S. exports $1 in furniture products for every $10 in imported furniture. After rising over 45 percent from the recession (2009) to $3.4 billion in 2015, U.S. exports of household furniture have decreased by 7 percent in 2 years to $3.15 billion in 2017. Only three countries – Canada, Mexico, and China – represent more than 3 percent of U.S. imports. More than half (56.3 percent) of U.S. furniture exports is to Canada (Table G).
The U.S. trade deficit in household furniture grew an additional negative $3 billion dollars last year, from -$24.6 billion in 2016 to -$27.6 billion in 2017. U.S. imports continue to increase from China alongside a growing Vietnam wood manufacturing presence. A poor showing for U.S. exports over the past two years is also troubling. With threats of trade wars brewing, and the U.S.’s dependency on China for its household furniture, the industry does not want to get caught in the crosshairs.