Ways Black Friday has a Positive Impact on the Economy

Most economists identify Black Friday as having a significant positive impact on the economy, because it gets people out spending their money.

“Black Friday” is the nickname given to the Friday after Thanksgiving each year.  Though on the surface that may seem like a negative designation (think of “Black Tuesday,” the day of the great stock market crash of 1929 that ushered in the Depression), it actually has positive connotations in this context.  The nickname comes from the retail world; it refers to the day on the calendar that is the biggest volume sales day for most stores, and the day they traditionally hope to move their yearly profit and loss figure into the “black” (i.e., the profitable range).

For many consumers, the day after Thanksgiving is a logical time to do some or all of their Christmas shopping.  Most people are procrastinators and aren’t inclined to take care of even necessary tasks months in advance, but then again they don’t want to wait too much past Thanksgiving, because then there’s the panic of doing things at the last minute, and worrying about stores being sold out of their most desirable items, etc.  So Thanksgiving weekend is a nice compromise.

Plus most consumers are off work from Thursday through Sunday for Thanksgiving, and with Thursday itself devoted to the holiday, the other three days, especially Friday, are when they are free to shop.

To get as big a piece of this action as possible, stores offer some of their biggest sales on Black Friday, basically trying to underbid their competitors to entice consumers.  So consumers are inclined to shop, which encourages retailers to compete for their business with tempting deals, which makes consumers even more inclined to shop, thus providing a boost to economic activity.

While on an individual level there is virtue in saving, in delaying gratification, in not living beyond one’s means, even in lessening one’s materialism and living more simply, on a collective scale in a capitalist economy the last thing most economists want to see is the population turning thrifty and disinclined to spend money on goods and services.

When something triggers massive spending like Black Friday, that means more money for retailers, which means they can pay employees and they can pay their suppliers, which in turn means their suppliers can pay employees, and down the line.  Then all those employees have enough money to spend, which keeps the economy humming.  More demand, more profit, more jobs, more income to create more demand, etc.

In a down economy, the spending boost of Black Friday is all the more needed.  For some retailers, it isn’t just the difference between making x amount of profit versus y amount of profit, but a matter of staying afloat at all.

But on the other hand, as much as it’s needed Black Friday generally isn’t as much of a blessing in years when the economy is weak.  People have less money to spend, so even the best retail day of the year may not be so good compared to other years.

And it isn’t just the amount that’s spent, but what it’s spent on.  On Black Friday in a year when consumers are struggling, they are more disciplined bargain shoppers than ever.

In a good year, a retailer gets people in the door with pretty good discounts, and they buy not only the sale items but plenty of other items, since they’re already there and they figure they might as well get more of their shopping done.  In a weak year, a retailer has to offer even bigger discounts—maybe even loss leaders where the store is losing money on each item sold—to get people in the door, and then most of the people buy just those sale items without doing all the extra impulse buying that the retailer is counting on.

In that case, a retailer might do a solid volume of business on Black Friday, but it still won’t be anywhere near as profitable as usual.

In conclusion, a day on the calendar where it is customary to go out and buy a lot of things is good, because it infuses the system with a lot of money, and strong demand like that can be a big factor in improving the economy.  But it’s not a miracle cure for an ailing economy, and in fact its magic is lessened precisely in those years when retailers and the economy as a whole most need a boost.


“Black Friday: Bright or Bleak for Economy?”

“‘Black Friday’ Tests Economy”

“Shoppers Start Holiday Marathon”

“What Is Black Friday?”