One of my favorite indicators, retail sales, was reported for September this morning, and it came in unchanged. This means that after factoring in +0.4% inflation in September, real retail sales were down -0.4%.

This is not good, because real retail sales have gone nowhere in 18 months, and have been down every single month since April with the exception of August, and are now down -1.4% since then:

Furthermore, real retail sales being negative YoY for more than a couple of months has for the past 75 years been an excellent coincident to short leading indicator for an oncoming recession:

The only false positives are in 1951 and 1966. In September, the YoY change was exactly *0*. Our current situation - of half a year of monthly readings just above or below zero - is very similar to the first half of 2007, and we know how that wound up!

Next, As I note almost every month, real retail sales (/2) are a good short leading indicator for employment. Here’s the long-term view from 1993-2019:

To avoid issues with scale, I am skipping the data from 2020 and early 2021. Here is the updated comparison with payrolls since June 2021:

Retail sales continue to forecast a deceleration in monthly payroll gains. Last autumn’s Booming payroll gains are a thing of the past. While there will always be monthly outliers, payroll gains averaging under 0.2% (about 300,000) - and gradually decelerating more - are what we should expect for the rest of this year. 

More By This Author:

September Consumer Inflation: Primarily A Function Of The Fictitious “Owners’ Equivalent Rent” Plus New Cars
As The Economy Slows, So Has Producer Price Growth
Scenes From The September Jobs Report