The Sermon On The Mall

The Christmas season brings out the gleeful child in adults. At dusk, harried midtown Manhattan office workers pause to gaze in delight at the Saks window displays. After Thanksgiving, world-weary grumbling gives way to sincere protestations of good will. But among one subset of adults the advent of the holiday season seems to inspire only fear and loathing. For as soon as the Christmas sales start (this year some commenced so early that clerks tripped over Easter eggs as they stacked up the merchandise), the doomsayers of the dismal science emerge from their caves to spread gloom.

This year, as they do every year, economists are highlighting gale-force headwinds: the insanely high price of oil, the poor housing market, a slowing economy, the credit crunch. And they note that non-economic factors ranging from concerns over the war in Iraq to the drought in Atlanta might depress spending. Chanukah almost always comes too late to spur Christmas sales—except in those years, like 2007, when it comes too early. (For the full roster of horribles, check out The Wall Street Journal Holiday Sales blog, which is to Scrooges what Daily Kos is to Bush haters.)

Thirty-five percent of adults plan to spend less this year than last year—the highest such level in eight years—according to a joint survey by the Consumer Federation of America and the Credit Union National Association. Only 15 percent plan to spend more. "It will be a tough year for retailers," says CUNA chief economist Bill Hampel. The National Retail Foundation predicts holiday sales, which have risen for 12 straight years, will rise just 4 percent this year—the worst showing since 2002.

Such Yuletide mewlings are nothing new. (Archeologists in Rome recently unearthed the hitherto unknown Epistle to the Keynesians, a fifth-century tract in which an economist frets that an impending invasion by the Visigoths and the lack of a must-have toga would sack the Christmas season.) Earlier in the fall, National Retail Federation chief economist Rosalind Wells flagged "rising interest rates, geopolitical threats and slow income growth" as sources of concern, while retail analyst Marshal Cohen of the NPD Group lamented that "there really aren't any hot items this year." The fall in question was the fall of 2005—a year in which Christmas sales rose 6.3 percent, the highest annual gain since 1999.

True, the macroeconomic climate does look considerably less hospitable than it has in recent memory, with oil at $95 a barrel and the University of Michigan Consumer Sentiment Index at its lowest level since October 2005, in the aftermath of Katrina. In years past, the lack of a must-have toy was a problem. This year we've got toys, like the recently recalled Aqua Dots, that are to-die-for. According to Harris Interactive, one third of Americans say they will buy fewer toys this year, while 46 percent say they will buy fewer products from China. (Good luck!)

So this could be the year the torrent of negative news finally keeps people away from the malls. But don't bet on it. To paraphrase H. L. Mencken, nobody ever went bankrupt underestimating the American people's desire to shop for electronics and sweaters of dubious patterns—even when they signal an intention not to. CUNA's Bill Hampel calls this the conundrum of Christmas: "Everyone says they want to spend less, and then they go out and increase spending by 5 or 6 percent."

Desires to limit holiday spending are easily confounded. There are always last-minute additions to the list—the client who sends over a box of cookies that must be reciprocated.

But there are deeper reasons American shoppers tell pollsters one thing and do another. Hardy American consumers have clearly conditioned themselves to shop till they drop in the frenzied five-week period between Thanksgiving and New Year's, no matter the distraction. (Insert lament/screed over the commercialization of the sacred here.) Over the decades, powerful social, emotional and cultural forces have built up, instilling habits that have evolved into instincts. In the last several weeks of each year, these forces compel Americans to flock to the malls, and to log on to shopping Web sites. To prepare for these journeys, people gather fuel and conserve energy (i.e., save money), or steel themselves for a few months of lean times.

The Christmas pessimists err by continually viewing holiday shopping as a discretionary item, subject to the short-term whims of the economy. But the evidence suggests that buying toys for children, jewelry for spouses and fruitcakes for those random folks for whom we have to buy presents isn't a matter of choice. It's compulsory at some level. And during boom and bust, Americans take the necessary measures to ensure they have enough cash to spend. From an economist's perspective, that may be the true meaning of Christmas.

The American consumer, exhausted, pinched, indebted and fearful, is likely to slow down and may eventually collapse—just not in the next few weeks. So while the macroeconomic tidings are anything but joyful, it's quite possible this will be a Merry Christmas for retailers.

On Penney's, on Zales, on Bergdorf and Goodman! On Target, on Wal-Mart, on Marcus and Neiman!