Mixed Economic Data Paints Mixed Picture – October 19, 2020

Over time, economic reports tend to move in the same direction. If the economy is expanding, the news is good. In a recession, the opposite occurs. However, over a short period, we may get one piece of good news, and one piece of unsettling news. That’s what happened last week.

Let’s start with the good news. Retail sales jumped 1.9% in September, easily exceeding the consensus forecast of 0.7% (Econoday/U.S. Census). Remove auto sales, which surged by 3.6%, and sales were up a healthy 1.5%.

What we are seeing are pockets of strength in the economy. It is exhibited in the retail sales data. It’s encouraging. But will it last?

Consumers have money from past stimulus bills, which is helping to fuel spending. Yet, barriers remain in some sectors including travel, airlines, hotels, sporting, and other arena events. Most of these categories are outside the retail sales classification.

Block the transmission mechanism for some parts of the economy, and consumers are funneling cash into other sectors, despite still-high unemployment.

Nonetheless, while spending is healthy, layoffs ticked higher last week, as first-time claims for unemployment insurance unexpectedly rose.

The illustration below compares first-time claims during the 2007-09 recession with the current recession. Millions are returning to work every month, but millions are also grappling every month with layoffs. And weekly layoffs remain above the peak in Great Recession.

Bottom line, the economy has made remarkable progress since April. But most reports illustrate that a full recovery has yet to take place.

Created 2020-10-19 14:21:26