The early reports of increased sales at retail after Thanksgiving are fueling a good day on the market, but it doesn’t look sustainable to me. With sales up 4.8 percent overall on Friday, much of that concentrated in discount stores, the anticipated gains aren’t large enough to sustain a substantial increase over last year, when year-to-year growth was an abysmal two percent. The fact that discounters did record business is no solace, since a good day for Wal-Mart is generally a bad day for everyone else, including the manufacturers who sell to Wal-Mart on razor thin margins, if the take any profit.
Sales fell off over the weekend and the other “biggest day” of the year, the last weekend before Christmas, when discounts are already kicking in a last ditch effort t attract shoppers, is looming ahead. It looks to me like the projected recovery is already running out of gas — and, considering that we’ve invested about $4 trillion in deficits to spur the sluggish job growth, the American people are getting a raw deal.
Wouldn’t it be better to spend $1 trillion on, say, education, today and see if that true investment in the people wouldn’t yield much greater long-term economic returns? But, no, we’re getting supply-side IOUs that our kids will have to pay back.
UPDATE: The strong results of the Institute for Supply Management manufacturing index, which came in at an unexpected 62.8 (anything above 50 is considered expansion) is undercut by the slower, much slower growth of the employment index the organization produces, which just crossed over the no-expansion mark this month. That means that if growth isn’t real during the holiday season, jobs will fall back into contraction territory and it is likely that having over-shot projections the manufacturing index will correct downward, too. All that said, Joel Narrof, chief economist at MFR Inc. is quoted by the Wall Street Journal as writing in a research note today: “This expansion is the real thing. We even have the possibility that in the payroll report, the manufacturing sector may no longer be a drag. While actual job increases may not show up for a while, we might expect that the losses will be minimal in November.”
Okay, so we’ll watch job figures carefully. If employment falls or does not show significant growth in November, the evidence suggests the recovery is running out of gas.