The good economic news kept coming with this morning’s retail sales report for December. Remember that this is one of my favorite indicators because adjusted for population, it is a fairly good long-leading indicator, and on a short-term basis has a consistent record of leading the trend in employment.

Nominally retail spending increased 0.6% for the month. More importantly, after adjusting for inflation, which rose 0.3%, real retail spending rounded to up 0.2%. This continued a nearly perfect record of monthly increases that started last March and is 2.2% above its post-pandemic stimulus low in February 2022. The only negative is that it does remain -1.9% below its post-pandemic peak in April 2022:

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The best way to visualize retail sales’ lead over employment (red in the graph below) is YoY (blue, /2 for scale), shown for the past 30 years. I also show real personal consumption of goods since the turn of the Millennium (light blue), which has a similar record:

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Here is the close-up since July 2022:

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The good news here is that YoY comparisons of real retail sales continue to improve, now up 1.1%. Real personal consumption of goods has similarly improved, up 1.8% as of November. Since nonfarm payrolls were up 1.7% YoY, both consumption series suggest that any further deceleration in jobs gains will be slow, and it is possible we get the fabled “soft landing,” with job growth leveling out at this trend rate.

To reiterate: this was a good report.

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