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

New Deal Democrat profile picture
New Deal Democrat


  • 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.


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

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New Deal Democrat profile picture
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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