The American Worker Stages a Comeback

After years of stagnating wages, the economic outlook is improving for Joe Six-Pack. Here’s what it means for convenience operators and the VIPs on both sides of the counter.

Photography by Colin Lenton
After finding itself in competition for front-line employees, Redner’s Markets in 2015 boosted wages. Robert McDonough, vice president of human resources, opposite, says it was a “right-sizing” of wages for strong performers such as store associate Sami German, shown here.

Consumers' Economic Twofer

The American consumer has some money to burn, thanks to higher wages and lower gas prices.

“Average hourly wages in July were up 2.6% from one year ago. That’s still below the long-term average but well above inflation, delivering real gains to Americans’ paychecks,” says Jessica Jaffe, community expert for Glassdoor, a Sausalito, Calif.-based employer review website. “This suggests a tightening labor market.”

As the country moves into another 12 months of positive employment growth, wage pressure will continue to build.

“Since the late 1990s, so many young workers haven’t had an opportunity to enter a labor market where wages are growing,” says Wenger of RAND Corp. “We’re finally getting back to that point after the brutal recession.

“I’m pretty bullish on the labor market in general.”

According to 2016 research from Technomic, 38% of consumers expect the economy to improve in the coming year, with millennials the most optimistic at 44%.

Beyond wage increases, consumers also have extra money in their pockets from low gasoline prices. In an analysis of spending by Chase credit and debit-card customers in 23 states, JPMorgan Chase Institute found that middle-income households saved about $480 in gasoline costs in 2015 compared to 2014—a year that saw low gas prices, too.

For 60% of households—those in the bottom three income quintiles—this represented a 1% increase in their annual income, or the equivalent of half of a mortgage or rent payment.

Where are they spending these savings? According to the JPMorgan Chase Institute analysis, 24% of it went to more gasoline, while 45% of it went to other goods and services, in particular restaurant meals and retail purchases.

“People in the [c-store] industry are reporting some good increases in nonfuel sales; definitely the customer has more money in their pocket than they otherwise would have,” says David Nelson, professor of economics at Western Washington University and president of Study Groups, Bellingham, Wash. Thirty percent of consumers in Technomic’s survey said they were spending more at c-stores in the past year because of lower gas prices. For superheavy c-store customers, 62% said their spending increased in the channel.

And according to a CSP retailer survey, nearly two-thirds of respondents said low gas prices have affected their sales, with nearly 43% enjoying higher in-store sales. More than a third reported higher fuel sales.

But the positive effects of low gasoline prices will not linger much longer, so the industry should make the most of these heady days while it can.

“Retailers have gotten the big benefit of a huge drop in gas prices and huge margins—that’s over,” says Nelson, citing the overall forecast for fuel prices and demand in 2017. While he anticipates it will be a “solid” year, “I don’t think this will be a record year like 2014 and 2015.”

Continued: Criminal Matters