Say what you will about household debt and the blowback from recession, but Joe Sixpack and his spendthrift ways won’t go quietly into the night, recession or no recession.
This morning’s update on retail sales for November was a reminder that ours is a consumer economy and old habits die hard. U.S. retail and food services sales for November rose 1.3% on a seasonally adjusted basis, the Census Bureau reports. A monthly rise above 1% for this series is impressive and should soothe worries that the danger of an imminent double-dip recession is lurking. Even after excluding volatile auto sales last month, retail sales climbed 1.2%. In addition, the advance was broad based, with only a few sectors posting declines.
One month a trend does not make, of course. But as our chart below suggests, the general bias appears to be looking up. There’s still a long way to go to close the gap between retail sales pre-recession and what prevails today. But for the moment, the most important issue at this stage is that a recovery is in progress, or so one can say with a bit more confidence today.
The encouraging retail sales news may be short lived, of course. Indeed, the holiday shopping season is upon us and so the temptation to buy is potent. It remains to be seen if it endures once the dreary winter months of 2010 arrive. And there’s the nagging problem with the labor market, which is still very much an open question, at best. But for a day, at least, there’s reason to breathe another sigh of relief if only to acknowledge that the risk of a deeper crisis than what’s already passed faded by another notch.
And not a moment too soon. In the December 2009 issue of The Beta Investment Report, we noted that our proprietary economic index had stumbled in October, dropping 0.4% for the month—the first since March 2009. Confirming the weakness was an even bigger fall in the BIR Leading Economic Index, which tumbled 1% (see chart below).
The question is whether this was merely a temporary blip or a sign of fresh weakness in the economic rebound? The true answer won’t be known for months, but today’s report on retail sales offers one more reason to vote in favor of the temporary blip explanation.
But rest assured, we’ll need to see improving signs in the labor market before we’re convinced that retail sales are on a sustained rebound. There’s reason to think that the economy will soon be creating jobs on a net basis, as suggested by the trend in nonfarm payrolls. Even then, there’s some doubt about the magnitude and duration of the expected recovery in the labor market.
Yes, we’re only a few steps into the thousand mile journey, but beggars can’t be choosy.