Jobless claims dropped substantially last week, near the lowest level in almost five years. Meanwhile, retail sales
rebounded in November. In short, we have two more economic updates that
support the case for expecting modest economic growth in the near
Let's look at both reports in more detail, start with consumer
spending. Retail sales rose 0.3% last month, modestly below the rate
projected by economists overall. Nonetheless, today's report shows a)
there's a post-Hurricane Sandy rebound factor juicing the numbers; and
b) retail spending isn't collapsing, as some of the more pessimistic
analysts have been predicting. In sum, a decent report and one that
continues to support the case for expecting modest growth in the economy
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Stripping out gasoline sales, which tumbled 4.0% in November, puts
retail ex-gas up by a much-stronger 0.8% last month. That's a reminder
that consumers are spending on discretionary items. A strong month for
auto sales is one reason, and the holiday shopping season doesn't hurt
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More importantly, the annual trend is holding up as well. Retail
sales rose 3.7% last month vs. the year-earlier level. A drop below this
rate into the low-3% range would be a warning sign for the business
cycle, but there's still a comfortable margin in today's numbers over
"The details look pretty solid," says
Ryan Sweet, a senior economist at Moody's Analytics. "The consumer is
continuing to support the recovery, which is important because
identifying the sources of growth is becoming increasingly difficult.
The burden is really starting to fall on the consumer."
For now, the beast is holding up his share of the burden, which means
that another data point for the November profile of the economy remains
on the side of growth.
Jobless claims certainly look better these days too. Last week's
tally of new filings for unemployment benefits dropped by 29,000 to a
seasonally adjusted 343,000. That's just a hair over the 342,000 mark
set for the week through October 6, the lowest since early 2008. For
four weeks running, claims have retreated, all but confirming that the
early November surge was a storm-related distortion.
If there's a reason to be cautious in today's jobless claims report
it can be found in the annual change for the unadjusted data. In
contrast with the weekly numbers, claims fell a slight 1.6% last week
vs. the level from a year ago. That's a bit too close to zero for
comfort, although one data point doesn't mean much. A series of repeat
performances in the weeks ahead, however, would be another matter.
For now, however, the data continues to support a forecast for slow
growth in the economy overall. I said as much on Monday, with the update
of The Capital Spectator Economic Trend Index, and today's numbers
strengthen the econometric case for arguing that recession risk is still
low, based on the available numbers. December and beyond are wide open
for debate, of course, but the odds are rising for expecting that
November will go into the history books as another month of expansion.