Wednesday, November 16, 2011

The Unemployment Numbers and People Working Off the Books

If you pay people not to work, they won't, or they will lie about having a job.

Ed Yardeni explains:
One way to revive confidence, in my opinion, is to end support payments for long-term unemployment. That should bring down the unemployment rate. Such government subsidies tend to prolong unemployment by reducing the incentive to find a job. My suspicion is that some of the recipients of such benefits are actually working for cash, and off the books.

This helps to explain why retail sales have been resilient despite high unemployment and weak payroll employment. In any event, the labor market seems to be improving, as evidenced by the four-week moving average of initial unemployment claims, which fell to 400,000 during the week of November 5. That was the lowest reading since the week of April 16. Let’s review that latest data on retail sales:

(1) Retail sales rose 7.2% y/y to a new record high of $4.77 trillion (saar) during October. That puts it 5.1% above the previous cyclical (and record) peak during November 2007. That’s quite impressive considering that sales of motor vehicles and parts are still 12.1% below their 2007 peak.

(2) Also at new record highs during October are the following retail sales categories: Sporting Goods, Hobby, Book & Music Stores ($92bn); Pharmacies & Drug Stores ($231bn); General Merchandise Stores ($637bn); Warehouse Clubs & Super Stores ($396bn in September); Food & Beverage Stores ($627bn); Nonstore Retailers ($403bn including Electronic Shopping & Mail Order Houses); and Miscellaneous Retailers ($124bn).

(3) Industry analysts have been raising their 2012 earnings expectations for the major Retailers since the beginning of this year. The biggest upward revision has been in Department Stores with an increase of 19.5% in the earnings estimate (ytd through the week of November 3). Also up big over this period are Apparel Retail (13.9), Home Improvement Retail (12.3), and Hypermarkets & Super Centers (7.9).
Bottom line: This data suggests that Bernanke money printing is finally reaching the consumer sector. Price inflation, given the amount of printing that has occurred, is likely not far behind.

1 comment:

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