If a shitty company falls, does it mean we're in a recession?

A few months ago, I was at work talking to a coworker when someone on CNN started talking about how the economy must be in a recession because some retailers were having trouble. The retailers they named included Macy's and Ethan Allen - stores I, and the coworker I was talking to, never even considered shopping at.

A few days ago, I was reading the Baltimore Sun. I can't seem to find the article online, but the gist was similar - the economy is in the tank, as you can tell from failing retailers. Those retailers: Sharper Image, Linens N Things, and Talbot's.

I'm aware that everyone seems to want to be able to declare that the economy is boned, and that we should expect soup lines and stockbrokers hurling themselves from windows. I'm of the mind that while the economy could be, and has been better, it's not doing all that bad. But that's besides the point.

The fact is, retailers fail all the time. That's part of Joseph Schumpter's idea of the creative destruction of capitalism. Some companies win, some lose, as new companies come up with better ways of doing things that old companies did, or as old companies don't keep up with changing markets.

And that, to me, is what's happening here. It's normal for retailers to go out of business, to have to close stores, or to have sales shrink - retail is enormously competitive, customers are fickle creatures, and the switching costs of going to another store are minimal. Throw in the internet, and it's surprising that chain stores remain in business as long as they do.

And the stores that have been cited have long been marginal or having trouble. I'm not really sure what Talbot's sells, but I've always associated it with clothing for rich old women. Linens N Things is one of those stores that's always puzzled me, if only because their pricing strategy seems to be to raise the price of everything 25% above their competitors, than offer 20% coupons. I can never tell the difference between them and Bed Bath And Beyond, and I seldom shop at either. If I need common kitchen stuff, I pick it up at Target during my regular shopping trips. If I need something complicated, like the scone pan my mom wanted for Christmas last year, I have had better luck finding it at Amazon than at a category-killer, and I dont' even have to put on pants to buy it. As far as Sharper Image, they have always sold cheap plastic crap that answers questions nobody's asked, like "what if my tie rack was motorized".

I'm not saying that a slower economy didn't hurt these businesses - but they were eventually going to have trouble, and just because a few retailers are going bankrupt doesn't necessarily mean the economy is dead.

As a casual bargain shopper, I watch retail pretty carefully, because I can occasionally scoop up deals at going out of business sales. In the past few years, CompUSA has closed up shop, and Radio Shack and OfficeMAX have closed a ton of stores, as have a number of regional department store chains, but these haven't been hailed as the end of the economy, probably because there wasn't an effort to portray the economy as broke. Now that it is, suddenly Sharper Image is an important economic indicator instead of the place where you buy gifts for people you don't really like and don't know what to get.