Wal-Mart and American retail represent the thermometer of the American economy because they measures the temperature of our national financial health. 

Last July 13, the Washington, D.C. city counsel passed a bill mandating a “living wage” of $12.50 per hour.  It’s demanding that Wal-Mart pay its employees nearly $5 more an hour than the current minimum wage.  In response, Wal-Mart’s canceled its plans to build three new stores in the D.C. area and is now reassessing options on three other stores already under construction.

Is this an example of how politicians don’t understand business and how it works?  Does anyone in D.C. benefit from this type of legislation? Should Wal-Mart be forced to pay its D.C. employees a 50 percent premium over the minimum wage?  A lot is riding on this bill, which could deprive neighborhoods of jobs and retail services of which Washington D.C. residents desperately need.

The employment picture in the District of Columbia is pretty dreary.  Its jobless rate jumped to 8.6 percent last July, from 8.5 percent in April, 2013 and the city has lost about 1600 jobs overall since then.  Many of these jobs were shaved from government positions, which paired back nearly 1,300 jobs.  The only sector in the District that added jobs was in the professional services area, adding some 600 positions.  However that is very anemic for what is considered the cornerstone of the District’s economy.  So should the Washington, DC city counsel even be thinking about a “living wage”?  Their first order of business should be to bring jobs to the District, not keep out businesses looking to open shop in the District, particularly a retailer of the size and scope of Wal-Mart. 

Which retail brand do most Americans associate with America? Coca-Cola (KO) , Google (GOOG), Apple (APPL) , or even Microsoft (MSFT)?  None of the above. The answer is Wal-Mart (WMT).  Half of all Americans say Wal-Mart best symbolizes America today according to a Vanity Fair/60 Minutes poll. This shouldn’t come as a surprise as Wal-Mart’s everyday low prices have always been a consolation to our weakening economy, which in turn measures all of our collective limited spending power. 

What is a surprise is that more money managers don’t see Wal-Mart as a leading indicator or warning sign when it comes to the U.S. economy and markets. In general retail sales are viewed by many as preferential reading of the economic health of the U.S.  This is due to their reading of consumer spending to the GDP number. Seventy percent of the total GDP is made up of consumer spending, so it’s important.  Basically, if consumers don’t feel secure in their jobs or are feeling financially pinched, they tend to spend less and the economy struggles to grow.  As a result, retail sales can be seen as a measurement of the financial health of American consumers as well as confidence in our economy going forward, especially today with high unemployment and low wage growth, poor economic growth, higher taxes, and rising food and fuel costs.  Now doesn’t this peak your curiosity and beg the question as to why Wal-Mart’s disappointing earnings doesn’t concern money managers and the retail investor with regard to investment portfolios?

Since Wal-Mart is the brand that best symbolizes the American people and their lives, we need to look no further than to Wal-Mart for a snap shot of the health of the American consumer and the U.S. economy.   Unfortunately, it’s is not a pretty picture.  Wal-Mart reported its second quarter 2013 earnings about two weeks ago, at a $1.24 a share, on revenues of a $116.2 billion. Analysts had been expecting earnings of $1.25 a share on $118.5 billion in revenues.  Plus sales in stores opened more than a year ago declined about 0.3 percent.  Wal-Mart also guided lower for the full year citing challenging sales and operating environment.  So Wal-Mart stock sold off sharply recently and is at risk of being negative for the last 52 weeks.   Thus with Wal-Mart missing it’s numbers, it could only mean one thing, the U.S. economy is weaker than believed.  So you have to wonder if Wal-Mart earnings disaster exposes a collapsing economy?  

Wal-Mart is not the only retail shop that is telling us something is wrong with the American economy.  Gap (GPS), Macy’s (M), Abercrombie and Fitch (ANF), Chico’s (CHS), Croc’s (CROX) and McDonald’s (MCD), which all cater to middle and low income Americans and their anemic earnings are telling us Americans are feeling the squeeze of a lackluster, uneven U.S. economy.   All of these retailers reported tepid sales, highlighting the stress that American consumers are feeling because of higher payroll taxes, expensive energy and a bad job market.  Their rotten earnings are telling us we are not in a recovery.

Wal-Mart is the true measure of the American economy and the economic data coming out of the U.S. reporting services such as jobs and GDP are re-confirming what Wal-Mart’s numbers are telling us today – the U.S. economy is not recovering.  Wal-Mart is American capitalism and American capitalism is Wal-Mart.  This raises the important question of if the American economic empire is in decline, does this mean so goes Wal-Mart, so goes America?

Dawn Bennett is CEO and Founder of Bennett Group Financial Services.  She can be reached at dbennett@bennettgroupfinancial.com