An Apparent Rebound From The Government Shutdown 'Mini-Recession,' But Then What?

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New Deal Democrat
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Summary

  • The “big four” coincident economic indicators relied upon by the NBER in dating recessions have now all been reported through February.
  • Three of the four declined during that period from previous highs in October or December.
  • This appears to confirm that the government shutdown caused a “mini-recession.”.
  • March data in employment and retail sales show a big rebound.
  • But the question remains whether recent lower interest rates will short-circuit the slowdown that has been telegraphed since last summer.

Introduction

A few weeks ago, I wrote that it looked like we had a “mini-recession” in the December-February time frame, in which case we should expect a rebound thereafter.

We got data apparently confirming both of those points this morning, contrasting recent weakness with a strong rebound.

The good news and the not-so-good news

Let’s start with the positives.

First of all, we had yet another new 49-year low in initial jobless claims, at 195,000 this morning:

Since in spring of 1969 there were weeks of less than 180,000 claims, that’s why we keep *not* having 50-year lows! But since the US population now is double what it was 50 years ago, on a per capita basis it’s not even close: these are record-low jobless claims.

Retail sales also bounced back sharply, up +1.6% nominally, and +1.2% on an inflation-adjusted basis:

The caveat, as you can see from the above graph, is that even with this strong rebound, real retail sales are -0.1% below where they were five months ago and per capita real retail sales are below where they were six months ago. Real retail sales per capita are also up only +0.6% from where they were 10 months ago - a continuing yellow flag.

But if retail sales for March were excellent, total business sales for February were not, up only +0.1% m/m and down -0.8% from their peak in November. Meanwhile, inventories continue to rise at +0.3%. Here are both for the past 25 years:

And here is a close-up of the past year:

As you can see, sales lead inventories. That sales are down while inventories continue to rise is not a good sign. But keep in mind that this data is still behind by one month. We won’t get total business sales that include this morning’s excellent retail sales

This article was written by

New Deal Democrat profile picture
3.68K Followers
New Deal democrat As a professional who started an individual investor for almost 30 yeas ago, I quickly focused on economic cycles and the order in which they typically proceed. I have been writing about the economy for nearly 15 of those years, developing several alternate systems that include mid-cycle, long leading, short leading, coincident, lagging and long lagging indicators. I also focus particularly on their effects on average working and middle class Americans.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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