The biggest thorn in the recovery narrative, or whatever it is that the FOMC claims is guiding its hand, is that consumers are not spending as they “should” under such circumstances. Retail sales not only have disappointed this year, bookended by “unexpected” weather on one and an as-yet excused position for the other, they are downright awful. That is confirmed by actual dollar figures in a broad range of industries even beyond just WalMart and Target.

I have also included the movie industry in that, particularly since 2014’s box office has been atrocious. I understand that statement applies more broadly than just the revenue of the movie business, as there is little doubt that most movies that come out now are some version of trash. But the same trash sold very well in 2013, so much so that Hollywood was very much excited about 2014 (sounds like another industry unfortunately using the Blue Chip Economic Survey).

No one expected Summer 2014 to tank. No one. Everyone’s saying, “Wait till next year,” but this year there was a Spider-Man, some X-Men, a bunch of Apes, more Transformers, a Godzilla, a gaggle of Expendables, Adam Sandler, and Melissa McCarthy — oh, and two Marvel movies. Moreover, this past Labor Day weekend was the worst since the post- 9/11 Labor Day weekend.

What is scary for the film business is that other than “Guardians of the Galaxy,” almost everything under-performed. Even a huge opening meant nothing, because the following weekend’s drop-off was so steep.

In terms of revenue, the “slump” this year is epically bad – something on the order of a 15% decline from 2013 despite that slew of “blockbusters” and “can’t misses.” If it was one or two percent, maybe even five, it would be a statistical anomaly, random chance of changing tastes perhaps. But 15% is enormous for a business that has largely been recession-proof (box office takes in both 2008 and 2009 were actually very good).

There is some fuzziness to the employment numbers presented below, as apparently the BLS combines motion pictures and music into one category, but still the timing of the slump should be what stands out:

Preliminary statistics from the BLS show that employment in those two industries has dropped to 298,000 in August — marking the first time in the past decade that the number has dropped below 300,000, and representing an 8% decline from 324,600 jobs in August 2013, and a 19% slide from 366,300 jobs in August 2012.

The monthly numbers began edging down in the latter half of 2013 to under 350,000, then slid to 329,900 in December. The figure slid to under 320,000 in February and plunged in May to 302,900. [emphasis added]

Given that the music industry is lumped in that figure, it certainly adds the element of structural shifts that are decimating recording. Undoubtedly, there is more than just cyclical or macro components to what is clearly a huge setback in movies. The entire premise or business model has been narrowed so that the entire prospective audience has been whittled down to only (slight hyperbole) the most motivated of fans. The absence of broad appeal is more conspicuous in 2014 because of the “unexpected” declines.

While those changes work through the economics of Hollywood, I think the timing of it is noticeable for how it frames the wherewithal of those “most motivated fans.” If even the warmest prospects fail to turn out for the most stable and bright franchises then it passes beyond the usual erosion. Regardless of the level of passion and willingness, movies are discretionary, and expensive at that. Where tight discretionary budgets may have allowed some additional freedom in 2013, any margin for movies looks to be gone this year.

As I said the last time I raised this anecdote, I am under no illusions that the garbage made this year may, in fact, be much worse than last; thus explaining the box office and employment. It is also the case that TV is stealing a good part of the moviegoing audience with oftentimes superior options at a fraction of the cost and hassle of the theater “experience” (I personally have not set foot in a movie theater in over a decade). However, given the timing here and what we know of consumer income and wages (regardless of how the Establishment Survey provides cover to gloss over QE’s now more obvious shortcomings and costs), it fits within the larger spending pattern exhibited under the monetary regime. That’s bad news that extends way beyond Hollywood.


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