- by New Deal democrat
[NOTE: I’ll report separately on industrial production later this morning.]
Real retail sales is my bellwether for the health of the consumer. And after 3 months of declines, we got a huge upturn in January. Before adjusting for inflation, retail sales jumped 5.3% - not annually, 5.3% in one month! After adjusting for inflation, sales were up 5.0%, to a new all-time high:
This is simply very good news, and adds to the evidence that, once the pandemic is under control, the economy is going to accelerate.
I also use retail sales as a very good short leading indicator for employment. Because the series is somewhat noisy, I use the YoY% change (which was up 6.0% in real terms) to anticipate what is likely to happen with the jobs numbers several months down the road. And once again, the news is good, both for overall jobs (red) and for the more granular number of aggregate hours of employment (gold):
The YoY growth in sales in the past 5 months has been equivalent to that during most of 2010. While neither jobs nor hours growth matched the growth rate quickly thereafter, the comparisons consistently got better and better.
Because temporary help jobs lead overall employment, the below graph again compares sales (blue), jobs (red), and temporary help jobs (green) YoY:
Because of this month’s good news is retail sales, I expect to see further gains in temporary help in next month’s jobs report (perhaps turning positive YoY), which is already presaged by the weekly Temporary Staffing Index having turned positive in the past several weeks.
For the past 2 months I have written that “I continue to expect employment to continue to rise - with a lag, and quite possibly a pause during this winter as the pandemic continues to rage - to match the level of sales.” Last month I added that “we certainly got the ‘pause’ in December’s employment report, and if we get more initial jobless claims reports like yesterday’s, a further downturn. But I still expect employment to rise to meet sales once the winter surge in cases and shutdowns of outdoor activities including dining both abate.” That is still my opinion, reinforced by this morning’s retail sales report.
