In its "advance" monthly report released this morning, the U.S. Census Bureau stated that retail sales dropped slightly from November to December. The decrease was unexpected and at odds with what private trackers of retail sales have been saying. Meanwhile, first-time unemployment claims unexpectedly rose, although the four-week running average that is considered a better barometer continued a trend that began early last spring by dropping to its lowest level since August 2008.
Jeff Bater, Sarah N. Lynch and Luca Di Leo at The Wall Street Journal reported:
Retail sales declined 0.3%, the Commerce Department said Thursday. Economists surveyed by Dow Jones Newswires forecast a 0.5% increase.
November sales, however, were adjusted upward, to a 1.8% increase from a previously reported 1.3% gain. October sales also rose strongly, up 1.2%.
Excluding the car sector, all other retail sales in December fell 0.2%. Economists expected a 0.3% increase.
The numbers were a disappointment for the economic recovery. The retail sales data are an important indicator of consumer spending. Consumer spending makes up 70% of GDP, which is the broad measure of U.S. economic activity. Thursday's report suggests high joblessness is restraining consumers and will mute the recovery.
While the upward revisions in estimates of retail sales in October and November offered some good news in contrast to the unexpectedly bad December sales, these month-over-month comparisons provide only a narrow view of what is actually going on. The October-November sales showed an improvement over 2008, but it's an unfair match-up considering that that year saw the steepest three-month plunge since the Census began keeping statistics on retail sales in 1992. When December sales in 2009 are compared with 2007, they don't look good at all, a 6% decline.
In fact, retail sales in October-December 2009, including motor vehicles and gasoline, were lower than they've been since 2005. And that's just in nominal dollars not adjusted for inflation. When inflation is added in, retail sales were lower in October-December 2009 than in every year since 2001. Likewise, retail sales for all 12 months of 2009 were lower, when adjusted for inflation, than in every year since 1999. Chalk up another "lost decade" to go along with the ones in wage, employment and stock market gains. (See chart.)
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While the majority of leading economic indicators continues an upward trend that began by early summer last year, most observers keep saying we're in for a tepid recovery. That view was reiterated Wednesday in the Federal Reserve's beige book. In The Wall Street Journal's biggest duh moment of the week so far:
Some economists fear that the high unemployment rate will hold steady for much of this year unless companies start hiring again.
No hiring, no jobs? Really? The government's economic stimulus had its greatest impact on growth in the 2nd and 3rd quarters of 2009 and, without additional spending, that impact will continue to fade. Under such circumstances, the probability of an oxymoronic "jobless recovery" is reinforced. And the term "double-dip recession" is being heard more frequently again. Not exactly good news with at least 26 million Americans out of work or working part time because there aren't enough full-time positions. But we keep being told that the pot of jobs is just over the horizon at the end of the happy-talk rainbow.
Meanwhile, as more and more people spend down their savings, exhaust their unemployment benefits (if they were lucky enough to have them in the first place) and lose their houses to foreclosure, the underlying structural problems of the economy, including a still vastly under-regulated banking industry, myopic trade policy and anti-progressive tax policy, seem destined to remain in place, ensuring that the next crisis will be even worse and may begin before the current one is over.