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.
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 number for another month.
The NBER has indicated that it relies upon real personal income, total business sales, industrial production, and employment in determining whether or not the country is in a recession. We know that employment has remained positive, but here are the first three (note that because we don’t have the income deflator for February, I am making use of CPI as a placeholder):
Three of the “big four” have declined (at least slightly in the case of real income) since October or December in its latest reports.
Throw in the punk payrolls number from February and it really does look that there was a brief downturn in the economy centered on the government shutdown. March payrolls and retail sales, as well as the initial claims reports since then, strongly suggest a rebound. The question then becomes whether the decline in interest rates this year, which may very well show up in a big bounce in housing permits and starts for March, reported tomorrow, can overcome the downturns in most of the long leading indicators that we saw in 2018.
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