Numbers

According to the monthly report of the US Census Bureau, retail sales came in higher in October — rising by 0.8%, following declines in both September and August. The October numbers are up 4.6% over last year, and total sales for the period of August through October of 2018 were up 5% from the same three-month period one year ago.

The strongest element of the October gains was sales by online retailers. These sales were up 12.1% from 2017, and continue to grow faster than all other retail sales — as they have for the better part of the past decade. These gains lend themselves to predictions of a robust buying season over the 2018 holidays.

Furthermore, the job market in the United States remains strong and the labor market tight. Initial jobless claims increased slightly from the previous four-week average — up 2,000, to a total of 216,000 — but still held far below the four-week average mark of 300,000 initial claims that would hint at coming problems in the labor market.

Analysis

Retail sales typically start to spike before the holiday season begins in earnest, but the fact that retail sales are up over last year is a good sign. Furthermore, the year-over-year increase for the three-month period of August through October bodes well for the proposition that increasing sales are a product of strong market fundamentals and not a one-off surge.

The low level of initial unemployment claims is indicative of a strong labor market, and a labor market that has been expanding apace for nearly three years. Initial jobless claims have remained below 300,000 since March of 2015, a more than three-year trend that makes up the longest such streak since 1969. As noted in previous weekly reports, not only are initial jobless claims at historic lows, but the number of new job openings and the job opening rate are extremely strong, as well. This means that not only are people not filing for unemployment, but fundamentals in the actual hiring market are strong as well.

A disturbing phenomenon of the Great Recession was a declining unemployment rate coupled with a lower rate of actual people employed. Disaffected workers were leaving the labor force entirely, shrinking the denominator in the unemployment rate equation without any evidence of actual job gains. With low unemployment, record job openings and low quit rates, it appears that this phenomenon may be less pronounced today.