The Retail Sales Shortage

Retail sales rose (seasonally adjusted) in March 2018 for the first time in four months. Related to last year’s big hurricanes and the distortions they produced, retail sales had surged in the three months following their immediate aftermath and now appear to be mean reverting toward what looks like the same weak pre-storm baseline. Exactly how far (or fast) won’t be known until subsequent months.

Unadjusted, retail sale rose 5.12% year-over-year. Despite those distortions last year, consumer spending appears more and more topped out around the same low levels as 2014. The 6-month average of 4.91% continues to be in a category different from past levels of economic health and growth. It is also practically the same as when retail sales growth peaked in September 2014 (5.03%).

It’s the lack of clear acceleration that demands our attention, with or without tropical disturbances. Past cyclical periods, including those related to near-recessions like 2015-16, are uniform in their “V” shapes. It may not quite be as flat as a perfectly scripted “L”, but after 2011 in particular that’s the closer symbolic reflection.

The result is one of time, and the massive costs associated with the accumulation. The conspicuous absence of cyclical factors leads us toward explanations focused on structural symptoms and possible causes.

In other words, how is the chart immediate above ever possible? To begin with, we have to recognize the universality of it as a matter of our current circumstances (much more than retail sales) while at the same time being left awestruck at its historical exceptionality. It’s not just that this isn’t supposed to happen, it isn’t supposed to be able to happen.

The indication of missing labor, as I’ve labeled directly on the prior baseline, is contentious. Much of any current discussion ignores this reality (the economy’s booming!), and where some discussion is allowed it centers around the increasingly ridiculous.

Set aside the fact that you would actually have to believe that a substantial proportion of Baby Boomers decided all at once to retire during the worst economic and market crisis of the last four generations (when 401k’s were joked about being 201k’s), or that fentanyl and heroin would have to have been introduced and re-introduced at the very same time, though you are left with some required account for labor participation that’s not the only issue.