New Diamond Year May Minimize Unemployment Level
2009: New Diamond Year Will Not Be Hard For Diamond Retailers
No one knows what is going to happen to the economy in the year ahead. Even most economists, who didn't foresee the current credit crisis, don't seem to have a firm grasp on things. It's pretty clear that we are in a serious recession, although by some reports it is not as serious as the recession in the early 1980s, which was also a terrible time for the diamond industry, with many companies going bankrupt. The scariest part is what's happening with the banks and the credit market.
Looking at the economy, there are reasons to be nervous, but also reasons to be optimistic. The big problem is with the rapidly growing unemployment numbers. If you are stretched, you may be able to buy jewelry. But that is hard to do when you don't have a job.
The new Obama Administration said it is going to do what it can to get the economy restarted, though we are unsure if it will be able to do that, and how long it will take. A recent Royal Bank of Canada report on the diamond industry predicted that "there will be no material improvement in underlying market conditions" until the second half of 2009, "at the earliest." The media is saying that this was one of the worst retail seasons in decades, even with stores offering discounts. If you look at the numbers from the big chains, you see some terrible drops – for example, 30% for Tiffany, and double digit declines for companies like Zale and Sterling. (See page six.) Already, we have seen a few chain bankruptcies.
We don't feel that this signals that people have turned away from diamonds, or that there is a signals that diamonds are no longer in tune with the public mood. There was an across-the-board drop in consumer spending. Diamonds and jewelry were not singled out.
And the bridal market remains strong. The basis of the diamond business is still love, and people still fall in love, in good times and bad.
We are well aware that, if you are looking for bad news, there is plenty to be found in the newspapers. But we believe in the long run, the diamond industry will prosper.
Avi Paz, head of the World Federation of Diamond Bourses, recently noted "that research conducted already after the onset of the financial crisis demonstrated that not only do diamonds retain their appeal, but they lead the luxury product category by a large margin."
"During the Asian financial crisis of the late 1990s, and in the general downturn experienced after the attacks on the United States in September 2001, we initially saw severe drops in consumer spending, even reaching into double digits," Paz said. "But diamond sales quickly recovered."