Retail sales rose again in November—the fifth consecutive monthly gain, the U.S. Census Bureau reports. Last month’s 0.8% increase brings seasonally adjusted retail sales to just under the all-time high set back in November 2007, which was the last month before the start of the Great Recession. It’s getting harder to argue that consumer spending is headed for a new normal of self-imposed saving and austerity. It’s too early to dismiss that possibility, but it looks like a lesser risk at the moment.
Holiday shopping undoubtedly is a factor, combined with the fact that the economy has stabilizied, albeit at a relatively weak level compared with post-recession periods in recent history. Nonetheless, the trend is unmistakable. “Consumers are on fire relative to expectations in the last three months,” Brian Jones, an economist at Societe Generale, tells Bloomberg.
That’s good news for the economic outlook. “Consumption is likely to post a solid rise in the fourth quarter. For the first time since the recession ended, consumers are contributing to growth in a real way,” FTN Financial’s chief economist Chris Low says via Reuters.
The trend in retail sales is also strong on a year-over-year basis. In fact, the 7%-to-8% annual pace of growth in recent months is well above the rate during boom years before the recession started in December 2007.
It all looks encouraging…until you remember that the job growth is still weak. That’s a sore point that inspires caution among some dismal scientists. Until the labor market moves beyond a tepid recovery, the retail sales trend may be destined for a slower pace next year. “This tentative consumer revival may not be the start of a prolonged period in which households become the engine of the economy once again,” warns Paul Dales, senior U.S. economist at Capital Economics, via AP. He argues that sluggish job growth will keep a lid on wage growth, which in turn will create headwinds for spending.
The warning is underscored by the latest payrolls report, which shows that job growth was weak last month, even by the deflated standards of the new normal. But all’s not lost. The hope is that the recent and long-awaited drop in initial jobless claims marks the start of better days for the labor market.
The next update on new weekly filings for unemployment benefits arrives on Thursday. The consensus forecast calls for a rise of 425,000 new claims (seasonally adjusted), or just slightly above the previous week’s 421,000, according to Briefing.com. The low-400,000 level is still painfully high, although that’s the lowest range since the start of the recession three years ago. If it holds, chalk up one more statistic in favor for thinking positively for retail sales and the economy overall.
The broad recovery is weak, subject to change, and vulnerable on a number of levels. But the good news is that there is a recovery. That’s still better than the alternative.