Save Money. Live Better

While you would be forgiven for thinking this blog post was about budgeting – it is actually a look at none other than Wal Mart.

We all know Wal Mart. We all have shopped at Wal Mart. We may not like Wal Mart, but we always seem to go to Wal Mart. Wal Mart is huge!!

Beyond what you think of Wal Mart as a shopper, and no matter what your opinion of Wal Mart may be, there is a lot that we can take away from such a company.

For decades Wal Mart has been what we would call an economic bell weather. There are several professional traders who will buy, sell and allocate portfolios based on what Wal Mart says in their earnings call, what data they present, and use Wal Mart as a general crystal ball for the future economy.

In case you weren’t aware, Wal Mart is a massive Corporation.

Wal Mart employs 1% of the entire US private workforce

Walmart operates one of the largest and safest fleets in the U.S., with 12,000 drivers, 10,000 tractors and 80,000 trailers driving 1.1 billion miles every year.

38 million people a day visit a Wal Mart. That is about the size of Canada’s population. Imagine if every day, every Canadian went to Wal Mart?

Wal Mart has cut it’s new employee wage offerings by around 14% since August 2023.

The reason some of these statistics are important is that what Wal Mart does – matters. What Wal Mart says – matters, and how Wal Mart changes their business is often viewed as a perfect insight into the economy.

I said all of that to highlight the chart below. Wal Mart released some data this week that has somehow gone under the radar. Basically, they have 29% less openings for jobs this year over last year, and a massive 22% drop in openings month over month. When the largest employer in the United States drops hiring by almost 30% in a year, it means something!!

Before I get the negative comments about this being a US based chart, and US based data – know this: The US economy put up a 4.9% GDP growth number this week, and Canada’s GDP growth is stuck somewhere around .80%. So if anything, this chart should scare the absolute shit out of you. In an economy that is growing 612% more, Wal Mart is still reducing job openings by almost 30%.

Now, some of this could just be the evolution of the business cycle. Some of this reduction could be competition from the likes of Amazon. Some of this could be the fact that Wal Mart is moving more towards self checkout options. All of these things could play a role in the reduction of the work force – but certainly it does not account for all of it.

Bruno Valko from RMG put out some really great comment pieces over the last couple of weeks, and in those pieces he linked shareholder reports from companies like CN Rail and UPS. The theme is becoming a very common one, and it appears that large corporations are starting to hunker down, reduce costs, and prepare for a bit of an economic winter. ( As an aside, if you are not signed up for Bruno’s emails – do yourself a favour and do so. I think the subscription fee is to fund an RMG deal, so a pretty good price for some extremely good data. )

Reducing costs is lingo for reducing staff, and reducing staff leads to a larger number of people being unemployed. The only thing that has kept the Canadian economy going this long is the fact that jobs numbers have been good. If people have income, they can move the dollars around, rob Peter to pay Paul, and rearrange the deck chairs on the Titanic. When the income from having a job stops – the economic data releases will be pure hell to watch.

I don’t know how long it takes, but it is starting. Wal Mart this week, last week Scotia Bank ( You’re richer than you think ) announced it would shutter branches, lay off staff, and “right size” the banks operations. Many tech firms have already laid off thousands and tens of thousands of employees. It is starting to add up.

Once the unemployment number rises, a fresh level of doom will hit Canada. Already the consumer confidence number is beyond abysmal. The Conference Board of Canada’s index of consumer confidence was below 60 for the second straight month in a row. This has never happened, and only 3 times did it even dip below 60……December 2008, March 2009, and April 2020. So what does 2 months in a row below 60 indicate? I don’t know what it means, but I know it DOESN’T signal a party ahead. Thanks Ben Rabidoux for the data on that one.

However you decide to view it, things are not pretty, but they are about to get even uglier. That doesn’t mean all is lost – it simply means your business strategy needs to be one that is flexible and moves with the times. Your mortgage business must re-invent itself, focus on what consumers need, and help the end client achieve their objective. It can be done, and the good brokers will get it done.

In the interest of full disclosure, I own stock of Wal Mart. I have held it many years, and I intend to hold it forever. This is not considered investment advice.