I am sure Naked Capitalism readers can clear up what a Bloomberg headline screams is an “American Mystery Story,” that the economy is creating more jobs, yet retail sales have fallen three months in a row, with the latest being a 0.6% decline in February versus an expected increase of 0.2%. The analysts quoted on Bloomberg blamed the terrible February weather and were confident consumer spending would pick up soon.
Of course this article could simply be Dr. Pangloss meets the job market. It somehow appears to elude most commentators that the economy is creating more jawbs than jobs, and that the labor participation rate actually fell from 62.9% to 62.8%. But analysts somehow manage to look past that. From the Bloomberg story:
“The expenditures that add up to gross domestic product are coming in a lot softer than employment,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC. “Why would retailers be hiring if sales are falling? Why would they be boosting hours if sales are falling and why would they be paying more?”
The other factor leading to lower spending is that the saving rate is up. Well, why shouldn’t the savings rate rise on a secular basis as the public realizes (if they haven’t already) that social safety nets, and most important of all, Medicare and Social Security, are being hollowed out?
I’m thus mystified by the uniform tone of boosterism in the media about the state of the economy. In New York, where many finance reporters live, things aren’t all that rosy, so it’s hard to attribute it to being biased by local readings. I’ve never seen more vacant stores than now, for instance. Even though that is driven by overly-aggresive rent increases (no joke, rents are being doubled in my ‘hood on Madison and Third Avenues), it still destroys good business and jobs (I’ve kept tabs when I can, and hardly any of the stores that are leaving due to rent increases are relocating). Similarly, salons, an indicator of discretionary spending, are hurting. The man who cuts my hair, who used to run a very successful salon, says he’s had multiple offers from salon owners begging him to take up the balance of their lease.
Admittedly this sighting is from December, but another local noted how things simply aren’t robust here. And remember, this is when reality started diverging from analyst expectations:
I don’t know what exactly is going on out there, but I’m seeing all the same stuff I saw in early 2008 ….the ease in getting high-end beauty appointments, sales in high-end stores when they shouldn’t be taking place, more theatre on TDF online and, of course, the plague of store closings (we had one seized by the marshals the other day). My building management sent out a second notice today reminding people to contribute to the annual fund for the building staff (the one’s that don’t get as many tips) something I’ve never seen them do before. I see very few people walking around Manhattan with shopping bags, and my building seems to have had a fall-off in Fed Ex and UPS packages in the past few days. I also wonder if the healthcare stuff plays into it — forcing people to deal with insurance right around the holidays seems to be yet another Obama fuck up.
Now having said that, I’m told that conditions are better in smaller cities like Baltimore (but that may be due to proximity to Washington, which has done the best in this “recovery”) and Boston.
Do readers care to clear up Bloomberg’s little “mystery”? There are clearly parts of the US that are stronger than others, and it would help to get more calibration of what local conditions are like.