Real retail sales in March lay an egg, suggesting a decline in nonfarm payrolls through the end of the summer

– by a New Deal Democrat

After a quiet early part of the week, we get a flurry of data today: retail sales and industrial production for March and general business sales for February. Since real total business sales is one of the 4 big matching indicators tracked by the NBER, and since retail sales are about 1/3 of the total and industrial production helps us estimate the rest, after the data comes out I can give forecasts for the *real,* not just the nominal values ​​for February and March.

But first, retail sales. . . Which laid an egg, as they do once or twice a year.

In this case, nominal retail sales decreased -1.0% for the month. As consumer prices increased by less than 0.1% in March, real retail sales also fell by -1.0%. Combined with a -0.6% decline in February, real retail sales have given back nearly 2/3 of the large increase in January and are down -3.0% from their peak in March 2021:

Real retail sales fell by -1.9% year-on-year, the biggest drop since the pandemic lockdown. As I write almost every month, they are a noisy but time-tested short leading indicator (/2) for jobs. Here’s the updated look at that comparison:

On an annual basis, wages in the non-agricultural sector have decreased by about 1/3, from +4% to +2.7% in the last 6 months. At this rate, they will have declined by more than 1/2 of that +4% in 3 or 4 months, which my rule of thumb means that there is likely to be a seasonally adjusted actual decline in monthly wages by the end of this summer.

UPDATE: Checking historical data back to 1948, an annual decline in real retail sales of -1.9%, our current value has *always* occurred at the start of or during a recession with the only exceptions being 1951-52 , and the months of September 1987 and October 2002.

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