Be Careful: Job and Retail Sales Data Are Always Good Until They Aren’t
How does a recession happen?
“Slowly and then all at once.”
Economists are increasingly confident the economy will avoid a recession. Such is due to strong job and retail sales data. Even Jerome Powell, in his recent speech, made note of the strength of the data. To wit:
“Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy.
In any case, inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal.‘”
Despite substantially tighter monetary policy, the strength of jobs and retail sales stumped expectations of a recessionary downturn in 2022. However, such was not surprising. This was a topic we wrote on several times, including Michael Lebowitz’s post.
“The economy has marched forward, ignoring higher interest rates and consistent calls for a recession. Credit goes to ‘We The People,’ the citizens of the U.S. A shout-out also goes to Uncle Sam for showering us with trillions of dollars of stimulus during the pandemic to fuel consumption.
Understanding why the economy has done so well is easy. Massive stimulus drove consumption. The difficult task ahead is forecasting how much the remnants of stimulus, and other forms of financial relief, will continue to fortify personal consumption and boost economic activity.”
Given that personal consumption consistently accounts for over two-thirds of economic activity, it is not surprising that when you send money directly to households, the result would be both a surge in consumption and higher
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