Retail Sales: A Leading Indicator for the Jobs Market?

If recent history is any guide, a notable deceleration in the pace of U.S. retail spending following a period of strong gains signals trouble ahead for the jobs market.

As the chart shows, each time that monthly retail sales growth has risen above 8.5 percent and subsequently reversed course (by roughly two percentage points or so), the turnaround has preceded a peak in year-on-year increases in total nonfarm payrolls.

Whether it reflects the fact that people are quick to rein in spending when they sense trouble brewing at work (or in the economy as a whole), or are having a harder time finding a job than previously, is not clear, but it makes intuitive sense that spending shifts would become evident before companies begin the difficult process of freezing or slashing head counts.

Of course, correlation is not causation, and two decades worth of monthly data is not what some would consider sufficient for a rigorous analysis. Nonetheless, it may be another reason not to take today's "unexpectedly" weak retail sales report, or the less-than-robust data reported in last year's final two months, too lightly.

Comments

[Howard T. Lewis III]

Take a look at Obummer's face. Lobotomy. Connecticut. 1979. He does everything on cue and has no mind of his own. He never explains the flip-flops because he is not capable of conceiving any reason to. A flip-flop is just that. A flip-flop. Every comment and every speech is spoken with the exact same contrived and rehearsed emotional set.

[Luke]

And your point is what? That a Republican would do any better?

What we are seeing is that there is absolutely no difference between the Republicans and Democrats and the people who call the shots do so thru "elected" officials.

Get out of the matrix.

[Tom]

http://questioneverything.typepad.com/
When will truth dawn on economists?
(from the article)

"Our whole economic system has evolved to depend entirely on consumer spending and growth of same. It is the only way we can keep ahead of the curve with respect to increasing population. It is the only way we can expect to offer jobs to young people entering the marketplace, where they have expectations of making a good salary and living the American dream. But for years now the trend has been becoming clearer and in the last half decade it has come to dominate our beliefs. Things are getting worse, and are likely to do so into the foreseeable future."

[John G.]

Nice analysis, Michael. Makes sense, and could be a harbinger of falling employment, unless The Fed ups the output on its money printing presses, and soon.

[Luke Anderson]

One difference this time is just how far retail sales fell during the recession. This means that a big year-over-year increase doesn't reflect as large of a change as it would have in previous iterations of this pattern. It would be interesting to see the retail numbers expressed in absolute terms on the graph.

[Innertrader]

While chart patterns are important, 4 events is absolutely nothing statistically. Statistically, I have to have a minimum of 135 events to find a base and within that sample, one will most likely experience 12 to 17 events in a roll that give a false signal as to the WHOLE or final results created by 135 events. Having said that, it is always good to pay attention to patterns.
Politically, demos have become socialist and Republicans have become Demos. The only REAL choice we have is socialism, in which case we'll get more of the same or Ron Paul, who will create a REAL CHANGE in America, back to the Constitution from which the greatest country on earth was created! It's just a matter of what you want your kids living like and it's a Simple choice!

[Feudal System Inc.]

Why not just go bankrupt?

Michigan's Hostile Takeover
A new "emergency" law backed by right-wing think tanks is turning Michigan cities over to powerful managers who can sell off city hall, break union contracts, privatize services—and even fire elected officials.

Schimmel got to work quickly, firing the city clerk, city attorney, and director of public works and outsourcing several city departments. City fire fighters were told that they would be fired if their department was not absorbed by Waterford Township's. Schimmel has proposed putting nearly every city property up for sale, including city hall, the police station, fire stations, water-pumping stations, the library, the golf course, and two cemeteries.

Williams and his six colleagues on city council have been stripped of their salary and official powers. "Nearly the whole city has been privatized," he laments.

http://motherjones.com/politics/2012/02/michigan-emergency-manager-pontiac-detroit?mrefid=

[Marc]

Well your times period coincides quite nicely with the credit expansion (M3). It was roughly around this period when the markets stopped moving independently of the USD index and some incredible debt was taken on by the western world. I am sure if you looked at the chart of credit expansion (shadow banking system) and contraction it would follow lock step in the same sort of chart. In 1992 that was the start of an incredible leverage period which ended four years ago.

[Christiaen24]

Interesting !

[pagoo]

The D stands for Dinosaur, while the R stands for Reptile. The differences between the two major political parties are cosmetic, in style rather than substance.

[Rocky]

Feudal System: What would you have the state of Michigan do with the city of Pontiac? Sell it to China and have them expel its current residents? It is essentially a failed city. Anyone with any money or talent has probably already moved away.

Innertrader: On the same page as the Mother Jones article referenced by Feudal System, there is the heading for an article on Ron Paul vs. Birth Control. Click on the heading and read the article. The man wants to give states the right to ban not only abortion but contraception and gay sex as well. His bill (introduced in Congress several times but never passed) would prohibit Federal Court interference in such social issues. Do you want to pay for the upkeep of more unwanted children in Pontiac and in every other ghetto in the country? Don't we have our hands full subsidizing the large families of religious fundamentalists already? Do a Google and Wikipedia search on Kiryas Joel, NY to see where some of your tax dollars are going. Be fruitful and multiply indeed.

Luke hit the nail on the head. Both parties are failing us.

[Roy Cobden]

Consider also the dramatic decreases in retail gasoline consumption and decreases in electrical energy consumption in the US in the last few months and there could be a major slowdown underway.

Yes, despite the fantasy 243,000 jobs created by the climb of the seasonally adjusted moving-average employment trend line.

A contrarian would also point out the excessive bullishness in the markets and say "Lookout below!".

[Feudal System Inc.]

@Rocky ...BANKRUPTCY WITHOUT PRIVATIZATION!

Poor America - P a n o r a m a [B B C] - Broadcast Date: 13th February 2012

Could this be a form of 'Social cleansing' without the need of war or disease inflicted by the orchestrators - simply a controlled bout of poverty? Or is this the forced education that only condition children to know only a certain amount of knowledge that can only ever see them progress in working environments such as confined offices within the 'Human Zoo' qualities within the desperately overcrowded cities.

Why are our children not educated properly - to be able to survive communally with real craft and building skills? Is the social mobility (as in other 'rich countries' such as the UK) only fairing the rich; the wealthy and the 'clever elite'; the white collar criminal, as per usual?

http://youtu.be/suJCvkazrTc

[Rocky]

I heard the BBC broadcast on the radio on Monday. And to think that many working class Americans are more concerned about gay marriage and abortions. If they miss a few paychecks, many of them will be joining the ranks of the homeless.

Memo to working class Americans. Don't worry about things that don't affect you. Worry about your own economic self-interest. If you want to kick Obama to the curb, go ahead. But if your heating oil subsidy is cut off next year, don't say I didn't warn you. The Republicans are not your friends. Maybe the Democrats aren't either, but they are a little more sensitive to your needs.

[Feudal System Inc.]

Who got the $?

Is Harrisburg’s Nightmare America’s Future?

http://sgtreport.com/2012/02/is-harrisburgs-nightmare-americas-future/

[Mark Reasinger PhD]

Ron Paul was getting the fed audited while everyone else was busy raising money for there campaigns not thinking about anything but themselves. He is the only canadate that will not play ball with the good old boys because it hurts the American people ,and he is for the big American people and small government. The rest are two horns on the same goat. Vote for Ron Paul and put an end to this nonsence.