Retail Sales (June)
More firms and establishments were open in June. The capacity for both production and commerce was higher and enhanced government transfers remained in place to support both activities.
Perhaps that’s an overly simplistic way to “analyze” June conditions, but I don’t think so. Against that backdrop, one would expect Retail Sales to show incremental improvement …
- Headline Retail Sales = +7.5% M/M = +1.1% Y/Y. The rebound spike in Auto Sales (~20% of Total Retail Sales) and the +11% M/M increase in Gas Prices (Gas Station Sales = ~10% of Total RS) were primary supports to the headline as was sequential strength in “re-opening” industries like clothing and sporting goods.
- Control Group = +5.6% M/M = +6.3% Y/Y = moderately stronger than the headline and a positive cap to 2Q from a GDP accounting perspective.
So, solid improvement to close a harrowing 2Q, but certainly tenuous as we move past the main thrust of the twin tailwinds of stimulus + deferred/rebound demand.
Again, and simplistically, the overarching risk is that the signaling value of any of the June data is left impotent given the re-implementation of lockdown measures into month-end across a significant swath of the population/GDP. Indeed, the weekly high-frequency data across surge metro’s (and in the aggregate) have almost universally rolled over in the past couple weeks and the next couple weeks promise more of the same.
Jobless Claims
Meanwhile, the stalled progress in Jobless Claims remained entrenched with Initial Claims printing 1.3M – effectively showing no improvement over the past 6 weeks. Total Initial Claims (State Initial Claims + PUA Claims (928K)) totaled 2.23M, also essentially flat W/W.
And while the positive revision to last weeks Continuing Claims and further sequential improvement this week remains a silver lining, the labor rebound remains woefully underwhelming for what should be the steepest part of the recovery curve. Indeed, total U.I. recipients has actually increased over the past month and remains north of 32M in the latest week.
It’s worth taking a quick step back:
- Prior to the COVID shock, the highest ever increase in Initial Claims was +695K. At 1.3M in the latest week, we continue to run at ~2X the largest prior increase ever … and we are four months into this….
- … The corollary to that uncomfortable reality is that it is increasingly less likely that job loss at this juncture can be fairly or predominately described as “temporary” and the likelihood for both 2nd wave layoffs and the incurring of structural damage continues to rise amidst protracted activity suppression.
- We may be primed for an absolute increase in Claims in the coming week(s) as fresh lockdowns beset companies already operating in the face of organic demand decline and/or mandated capacity restrictions (i.e. at negative or barely breakeven profit levels) and as policy support funding becomes increasingly exhausted.
The scope and scale of the shock always promised a painfully plodding recovery in the labor market. Just because we are charged with high-frequency contextualization of the recovery doesn’t change that temporal reality.
