Comics Economics, Part 8

By | Tuesday, November 18, 2008 3 comments
So, are we in a recession or aren't we? If so, are comics immune?

(By the way, normally, I try to make all of my posts as internationally accessible as possible, despite my obvious U.S.-centrism. With so many countries having a multitude of different fiscal issues, though, I'm going to have to limit my post today talking exclusively about the U.S. economy. Hopefully, some of the basic ideas are somewhat transferable internationally.)

By definition, a recession is two consecutive quarters of negative capital growth. In layman's terms, that means six months of the country spending less than it used to. Not just individuals, mind you, but everyone, including corporations. For the first six months of 2008, the U.S. GDP (Gross Domestic Product -- the dollar value of everything a country produces) did in fact rise, albeit slowly. It wasn't until the third quarter (July-September) that we saw an actual decrease. By that estimation, we might be in a recession, but we won't know until the end of the year.

However, some economists have argued that the inflation rate throughout 2008 has far outpaced the GDP. For example, if the GDP increases by .5% but the inflation rate for the same period is 1.5%, the real-world effect would be the same as if the GDP decreased by 1%. By that definition, we've been in a recession for essentially all of 2008.

Further confusing matters, an October study from Moody's noted that 381 of the States' largest cities were actively in a recession by the common definition, as were 28 states. Springfield, Kansas might be fine, but Atlanta, Georgia not so much. But since CNN is based in Atlanta, their perspective is going to be one of an economic downturn, which they're going to report on and broadcast to a national audience... including Springfield. Which, not surprisingly, scares and confuses them.

We are (or, at least, I am) still waiting on October sales numbers in comicdom to see how they compare to September's, when the economy took a noticeable turn for the worst. But, obviously, I've been keeping abreast of anecdotal news sources from individual comic shops, and the news is positive. Lone Star Comics reports "modest gains", Comix Experience is up 15% over last year, and Super-Fly Comics & Games just had their "best October in history." Indeed, Super-Fly has plans to expand into a new location in early 2009, they're doing so well -- despite my initial reservations. (For the record, I'm quite happy to have been totally wrong back then!)

Soooo... comics are recession-proof?

Well, there's a particularly interesting bit in that same piece that talks to Lone Star's General Manager, Chris Powell. Powell says, "In my work with ComicsPRO, I have contact with retailers all over the country. Different parts of the country are being affected by the economic downturns in varying degrees, so I seem to be hearing much more doom and gloom from the east and west coasts or areas that have had large layoffs."

What's particularly interesting is that squares very well with the actual data we're seeing. Below is a map of those 381 metropolitan areas I mentioned above. As you can see, most of said areas are on the east and west coasts. Moreover, this map in particular (from a separate PMI report; wholly unrelated to the Moody's one I cited earlier AFAIK) shows the risk of that area's home prices falling in the near future.
Why are home prices relevant? Well, because it was the housing market that really start causing all the problems in the first place. Also, it's a good indicator of how wealthy people feel. Many people don't play in the stock market, and their 401k plans are long-term investments that they can't really touch until they retire. But their house? That can be sold pretty readily for cash, and is almost as liquid as your bank account. ("Liquid" means how quickly you can get access to the money.) So when home values drop, people feel like they have less money.

Going back to that map, then, the implication is that the areas hardest hit -- with regard to how they FEEL they're getting the pinch -- are on the east and west coasts. The places Powell noted were seeing the biggest problems in the comics market. Probably not so coincidentally, they're ALSO they centralized locations of many major media outlets -- the ones who are telling the rest of the country how bad things are.

For the record, here's a map indicating which states are in recession. Notice again that the swath of not-yet-in-a-recession states runs through the middle of the country.
I pointed out the other day how even a single country can have multiple parallel, but distinct, economies. I think that's what we're seeing right now. The United States is a huge country by any definition so it should come as no surprise that any economic change (good or bad) rolls across the country relatively slowly, and not just smacks it equally all at once. We're talking about over 300 million people! There are economies within economies within economies within economies at that scale.

I talked yesterday about this at a more personal level. One company closes. Which causes another company to close. Those two closures put thousands of people out of work. Those people buy less, and impact other businesses. But it works at a larger level, too. Staying with that DHL issue I was talking about, they're an international company? What they do doesn't affect ONLY the people/companies in Wilmington, OH. That's going to ripple throughout any number of businesses and, indeed, whole industries.

But, like any ripple a pond or lake, it takes time for those ripples to reach out across the water. It affects the water in the immediate area first, and then slowly rolls out across the surface of the pond. The leaf floating close to the epicenter will be disturbed far sooner than the grains of sand along the shore.

We're still pretty early in this economic period, regardless if it's officially considered a recession or not. While I don't doubt that comic fans are tough bunch who stick through a lot of garbage just to get their comic fix, each person will reach their breaking point at a different time. When they say, "You know, I really need to spend my income on food and shelter instead of comic books."

So, even when we do start to look at October's overall sales numbers, that will only reflect the collective national trends, and not individual localities. There's a good chunk of the country -- according to most statistics I've found -- that aren't yet in a recession. Those states/regions could well offset (to some degree) whatever recessionary problems we see in other parts of the country.

There was a lot of pundit talk during the recent election about how no group of people is monolithic. That holds true here as well, and the economic realties of Atlanta won't necessarily mimic the economic realities of Springfield.

To be continued...
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Anonymous said...

Hey Sean, I live in Kansas. I don't think we have a Springfield. Maybe you were just using a fake name to make a point. But now I am scared and confused watching CNN, not only about economics but about geography! ;)

Springfield, KS


Anonymous said...

Dude, you're awesome!! :) Ok well I DID just move here from Boston only a year ago, but still I guess I should have known that. Hehehe... Anyway, Sean - I read your site every day and I promise I will TRY not to be one of those annoying people who never comment unless they want to point out a mistake. At least I'll try not to be that annoying person in the future!