If a recovery has started, it’s not being lead by retail sales:
Dec. 2 (Bloomberg) — U.S. retail sales may have risen for the third straight month in November as purchases during the Black Friday weekend propped up holiday sales, a research firm said.
November sales may have advanced 2.4 percent, according to analysts’ estimates compiled by Retail Metrics Inc. That compares with a slump of 7.3 percent last year, the Swampscott, Massachusetts-based firm said.
The reported uptick in spending over the Black Friday weekend hasn’t changed the National Retail Federation’s prediction of a 1 percent decline for the holiday-shopping season. Increases in electronics, jewelry and online purchases in November countered declines in apparel, luxury and department-store sales, according to data released today by MasterCard Advisors in its SpendingPulse report.
“Consumer spending has sort of leveled off,†Kamalesh Rao, director of economic research for SpendingPulse, said yesterday in a telephone interview. SpendingPulse measures retail sales across all payment forms, including cash and checks. “It’s not really showing any great growth, but it’s also not showing any great decline.â€
In his column today Robert Samuelson, in a mild critique of the Obama Administration’s economic policy, buries a likely explanation:
Obama can’t be fairly blamed for most job losses, which stemmed from a crisis predating his election. But he has made a bad situation somewhat worse. His unwillingness to advance trade agreements (notably, with Colombia and South Korea) has hurt exports. The hostility to oil and gas drilling penalizes one source of domestic investment spending. More important, the decision to press controversial proposals (health care, climate change) was bound to increase uncertainty and undermine confidence. Some firms are postponing spending projects “until there is more clarity,” Zandi notes. Others are put off by anti-business rhetoric.
The emphasis is mine. Anyone who is privy to the planning in a company of any size whatever knows that’s the case.
Even though retail sales have stopped their precipitous decline, YTD retail sales are still lower than they’ve been since 2005. No green shoots there.
So, what will lead the recovery? It won’t be housing which has lead the last several recoveries. Inventories are still high; we’re enormously overbuilt. I think that we’re likely to see another wave of foreclosures over the next several months, particularly as more retailers fail, and that will further depress housing starts.
It won’t be the financial sector, either. Even though we’re coming up to the two year mark on the beginning of the crisis in the financial sector, precious few of the problems that precipitated have been dealt with: all of those toxic assets that TARP, Son of TARP, and the Return of TARP were supposed to address remain on the banks’ books.
It won’t be healthcare. Between 50% and 60% of healthcare dollars come from taxpayers and deadweight loss will ensure that growth from healthcare spending will be less than what would have resulted without it. Besides, in the near term more money spent on healthcare doesn’t mean expansion of the sector in terms of jobs it just means that those already in the sector get raises.
It won’t be government or education. The same issues mentioned about healthcare apply to government and education in spades.
Exports? As long as the Chinese maintain their dollar peg and other countries are willing to block our imports (whatever pretext is used), I can’t imagine an export-driven recovery.
For an economic recovery to come it must start from somewhere. Right now recovery still looks far, far away.
Naturally, I agree, as the highlighted text in Samuelsons’s remarks have been part of my mantra.
Where will the recovery come from? Three guiding principals/issues/observations:
1) If the government wants to run deficits as a result of fiscal stimulus policy, then let that fiscal stimulus be tax cuts. The consumer can directly decide how it is spent, not government employees or politically favored groups.
2) It will take time. But de-levering will occur, population will grow, surpluses will be absorbed. It always has. But it may take a long time.
3) My biggest criticism of Obama: get rid of this pro-union, high tax, regulatory, anti-business atmosphere. You can’t terrify businesses and then look around and ask “where are the jobs?” This, of course, has no chance of happening.
An ominous note: the commercial real estate loan default debacle is still out there waiting to occur. And hear me on this. So many of the lenders to c real estate are not the Chases or BoA’s. They are community banks. And its community banks that are the backbone of small business lending, not the Big 5. (That is, they make working capital and construction loans. The Big 5 have taken their bailouts and cheap money and simply gone up the yield curve for the arbitrage.) That’s not a good prognosis for small business growth and employment.
My friends in community banking are telling me that federal regulators are scared stiff of a prospective default in commercial real estate to the extent that they’re effectively prohibiting them from doing even the most solid of business in that area. Lest we forget: community banks are small businesses, too.
And its very insidious, a domino effect. Think about all the strip mall guys. You have an anchor tenant to pay bills and draw traffic. But if the anchor drops out or is really slow, then the other little businesses drop out for lack of traffic. The strip mall developer doesn’t have the totality of rents he expected……..loan default.
But the bank can’t run or fill the mall. They can’t foreclose and sell on a collateral basis. So the bank is compromised, and therefore is not making an inventory or equipment loan to the XYZ widget company.
Bad.
In other words the Feds are causing the credit to freeze up. Great. Great way to promote growth.
One thing that struck me about the Mankiw article is how little feel for numbers Brad DeLong seems to have. Or perhaps he doesn’t care.
My experience in life is that a feel for numbers is something you’ve either got or you don’t. Education doesn’t have much to do with it. Advanced mathematical training may not, either.
Intuition into what’s causing a trend line have the slope that it does is an example of that feel.