Inflation Nation

[Joe Kernan]

More Grim Retail Data Ahead Next Week


As in the week just ended, the worst news of the upcoming week is likely to come Friday -- when the Department of Commerce reports on retail sales for October, a broader report than the already-reported dismal chain store sales data.

The retail sales report comes on the heels of a series of negative economic indicators -- highlighted by Friday’s employment report -- all confirming the recession, interrupted only by the election.

The details of the jobs report were actually far worse than the headline indicators:

The 10th consecutive month-to-month decrease in payroll jobs for October, marking the first time jobs have fallen for nine straight months since 2001-02. The month-over-month decline in October was lower than the revised job losses for September, which represented the steepest month-to-month decline since the economy lost 292,000 jobs in November 2001.
The number of people (16 years of age and older) unemployed -- out of work and looking for a job -- increased 604,000 in October, the sixth consecutive monthly increase. During that stretch, the number of people unemployed is up 2,484,000 to 10,080,000, the highest unemployment number since September 1983.
The unemployment rate rose to its highest level since March 1994, up from 4.8% one year ago -- the steepest year-to-year increase in the unemployment rate since the 12 months ended December 2001.
The number of people with jobs declined for the sixth straight month for the first time since November 1990 to March 1991.
The civilian employment rate -- measuring the number of people with jobs as a percentage of the working age population -- fell to 61.8%, the lowest level since October 1993. This means 38.2% of all people aged 16 and over are not working. (The unemployment rate reflects only people who want to work.)

The unemployment rate increased even as jobs declined, highlighting the strains on households. The employment report actually covers two separate surveys: the “household” survey, which produces the unemployment rate, and the “establishment” survey, which yields the job count. The increase in the unemployment rate resulted from an increase in the number of people unemployed -- that is, out of work, available for work and seeking work.

With the number of jobs shrinking, it would be easy to be discouraged and not even bother to look for work, thus falling out of the work force and the unemployment rate calculation. That’s not the case though as households continue to struggle to meet expenses.

Those struggles will become readily apparent in the key data release in the upcoming week -- a week shortened by Tuesday’s Veterans Day observance, Ironically, the relief from lower gasoline prices could result in a reduction in retails sale, since gasoline sales have been a significant component of retail activity. Even with gasoline prices falling, the report is expected to show consumers are not using those savings for other purchases. As suggested by the Federal Reserve’s Senior Loan Officer Survey, consumers have limited opportunities to use credit to supplement income to prop up spending.

The loan officer survey -- for residential loans -- mirrored the weekly Mortgage Bankers Association survey in showing weaker demand for mortgage loans and all banks surveyed reported tighter standards for subprime loans. And the Fed survey suggested weaker spending in months to come as consumers struggle with weaker earnings with fewer borrowing opportunities to provide spending cash.

Even the opportunity to tap into home equity remains limited. According to Freddie Mac, cash-out mortgage refinance activity fell sharply during the third quarter from year-earlier levels. Over the first three quarters of 2008, Freddie Mac reported, the share of refinances with a cash-out component was 63%, the lowest level since 2004.

The other interesting, if not key, set of numbers in the upcoming week will be the often-overlooked JOLTS report -- Job Openings and Labor Turnover Survey -- which will describe jobs flows such as hirings, separations and available jobs.