Thursday, January 16, 2020

The consumer is (probably) still alright: initial jobless claims and retail sales

 - by New Deal democrat

While the producer side of the US economy is almost certainly in a shallow recession, the consumer side has been holding up pretty well.  That was confirmed in two important releases this morning.

First, initial jobless claims declined to 204,000, one of the lowest numbers during this entire expansion. As a result, the 4 week average, at 216,250 is only about 7% higher than its lowest point during that time, and the first two weeks of January, at 209,000, are more than -10% lower than the January average last year. In short, both of my metrics for rating jobless claims have flipped back to positive. Here are both metrics, with the YoY measure in red, left scale, with the measure normed from the April bottom at 100 on the right scale:

Only continuing claims, less leading but less noisy, continue to flash yellow: the 4 week average, at 1,755.5 million, is 2.5% higher than one year ago (I would need a reading of 5% higher or more YoY for this to flash red):

Second, nominal retail sales increased by +0.3% in December, and November was revised slightly higher to +0.3% as well. Since consumer inflation averaged a little less during those two months, real retail sales increased +0.1%.  On a per capita basis, they were flat.

Here are both measures, normed to 100 as of their most recent peak in August:

We’ve had similar periods of flatness previously during this expansion, for example late 2018 as shown in the above graph. It would take two more months of readings below the August peak for me to flip this to neutral. For now it remains a weak positive.

The bottom line is that, while there is some flatness, there are no signs of the consumer actually rolling over. Without that, a shallow downturn on the producer side is not enough to tip the whole economy into recession.