It was not long ago when signs for “Help Wanted” seemed to be in every store window. That is starting to be replaced in 2024 and 2025 with “Store Closing” signs. This switcheroo tells us volumes about how people and the economy are adjusting to the Fed’s money printing business. While the government and the wealthy elite benefit from the money printing, consumers and workers only seem to suffer.
I do feel sorry for the rank-and-file workers in the economy, but my greatest gratitude and admiration is for the entrepreneurs and managers that are responsible for our prosperity, provide all the real jobs, and, in addition, create the tax base. Their much-maligned work and the changes they have been forced to make are truly remarkable in the face of the onslaught of change that has been unleashed by the government and the Federal Reserve, especially since covid.
According to the ABCT, firings, mass layoffs and closures are late-stage events that are predictable from the previous stages starting with the Fed’s money printing. It is not the result of some random or mysterious psychological process. Sure, managers make plenty of what appear to be bonehead decisions, but I don’t envy them for the tough decisions they have to make every day.
We know it’s a Fed-caused business cycle because the trends happen in stages along with spikes in the data, rather than in a normal fashion, with no spikes and correlation—so large numbers of “Help Wanted” signs followed later by large numbers of “Store Closure” signs. The time of adjustment with business cycles is uncertain. We don’t know exactly how much time will be involved or exactly how events will unfold. We do know that Trump’s tariffs will make things worse, but not by how much.
The ways in which people have been adapting is particularly illuminating to the cause of the cycle—the Fed’s money supply expansion, but also to the fact that it causes, not just higher prices, but that it does cause a cyclical disturbance and that it creates winners and losers, and that, above all else, paper money is not neutral!
Last year, retail closures reached 3/4 of the covid peak (boosted by some corporate bankruptcies) including large numbers of Family Dollar stores, CVS pharmacies, and Big Lots. That number is expected to double in 2025, led by Party City, Walgreens, 7-Eleven, and Macy’s. According to Intelligent HQ, in 2024 the:
Goldman Sachs survey found that 91% of small business owners are struggling with the current economic impact on their industries. 56% report that the situation has worsened since the beginning of the year. Are small business owners prepared for these upcoming challenges in 2025?
Of course, many small independent businesses are also closing, partly for traditional reasons because small independent businesses fail a lot even in normal times, but also for cycle-related reasons, such as a downturn in the real income of their consumers and the abnormally and stubbornly rising costs due to monetary inflation by the Fed.
Changing consumer trends have been happening forever and the online trend has been firmly in place for 25 years and the delivery trend for over 5 years. These are also chains that are both opening and closing stores in large numbers. The retail landscape has already been adapting to those changing trends.
One trend that we have been pointing to is the economic pinch inflation has on low and middle-income families. See the recent episode on how inflation is impacting “satisfaction” and voting patterns. There are also signs that consumers are trading down from Target, to Walmart, and to the dollar stores, in addition to just “doing without.”
The other dominant trend is the stubbornness of rising costs. Labor has become more expensive and scarce in many occupations. The costs of materials and goods continue to rise. Rent, utilities, insurance continue to rise. The cost of government red tape and access to capital are major problems. This is frustrating to consumers and business owners alike.
Business closures and startups are visible, but entrepreneurs and managers have been working at a frantic pace to keep companies operational and profitable enough to stay in business and expand. Staffing and shift changes, input mixes, technological fixes, product lines, and operating hours are just some of the noteworthy aspects or “margins” of the business that have been changing at revolutionary speed compared to normal conditions. Of course, customers don’t like price hikes, surcharges, and automated tipping, but—under the circumstances—it is completely understandable.
There are also business-specific changes that have been made. A restaurant may have transitioned from dine-in only to take-out only, to dine-in and take out, added delivery, and become a catering-only business in a matter of a few years.
The menu had to change, hours of operation, along with big staffing changes. Inventories and suppliers of food items, condiments, and cleaning supplies all changed. Washing dishes and glasses might now all be replaced with take-out containers. The industrial dishwasher might be just sitting there, taking up space, or replaced with some cooking unit and the dishwasher crew replaced with a delivery crew or social media contractor. Even the politicized choice of what type of straw to offer customers has become a tense business decision!
As Hayek pointed out, the knowledge to make such changes only exists in the mind of individuals at the local level. Their incentive to profit and stay in business is the reason for the dependability of capitalism. You should read Ludwig von Mises’s article “Profit and Loss.”
Artificial intelligence might help with this small business decision-making and that of their franchise-chain big brothers, but it will never be able to replace it. Of course, Hayek’s point also lays bare the general ineptitude of government-run operations to even keep up under such dynamic or even normal conditions! Government bureaucracies can only continue to exist with subsidized, routinized operations.
The main source of our frustrations as consumers is the Federal Reserve. I will continue to be grateful to the entrepreneurs and managers and their staff for trudging through these difficult times.
