Houston, We Have Recoupling - Initial Claims Back Over 400,000 (Post Next Week's Revision), Retail Sales Ex Autos Worst Since Early 2010

Remember that whole "US is decoupling" theme so pathologically spread around by two-bit propaganda media outfits staffed by journalism B.A. majors? Time to put it in the trash where it belongs. As long expected, the temp hire surge, so effectively used by retailers to dump inventory below cost (just ask Sears), is over, and in the first week of 2012, Seasonally Adjusted claims soared to 399,000, the highest since November and a number which next week will be revised over 400,000, a decimation of expectations of 375,000 (naturally last week's number was revised upward from 372K to 375K - a long-lasting BLS tradition of fudging data that everyone knows about now). The Non-Seasonally adjusted number was +102,314 claims in the first week of the year. And the real question is how many of these real departures were of the banker type, where the impact on lost withholding taxes going forward, and thus government revenues, will be quite dire. Continuing claims also missed expectations, rising to 3628K from a revised 3609K (expectation was for an unchanged print, pre-revision, of 3595K). And the worst news is that the 99-week cliff continues to grab more and more, with 48k people dropping off all rolls, and thus from the labor force completely, meaning the labor force participation rate in January will likely drop to another fresh 30 year low. But the horrendous jobs update was only one part. The other one focuses on actual consumer spending, as confirmed by the major miss in retail sales which were up 0.1% on expectations of 0.3%, but the entire gain was due to car purchases primarily driven by cheap govt-funded subprime credit for GM vehicles. Sales ex-autos actually declined by 0.2%, on an expectation of 0.3% rise: this was the first decline and worst print since early 2010. So much for the consumer-led recovery. And so much for the unemployment pick up. And so much for the decoupling. The chart below shows what will happen as the world finally reconverges, as was posted yesterday.

Some more thoughts on retail sales via Bloomberg and CRT:

  • Control sales drop “a very bad sign for the condition of the consumer, bodes ill for personal spending” in 1Q, says Bloomberg economist Joseph Brusuelas
  • Underlying detail “suggests a very difficult holiday sales season,” points to “difficult earnings season for retailers": Brusuelas
  • Supply/production estimates on commodities ‘‘much stronger than expected,’’ means ‘‘several commodities could weaken further,’’ says Bloomberg economist Rich Yamarone
  • "Big surprise” in 0.4% decline for non-store retailers, proxy for Internet sales: Brusuelas
  • Weaker-than-forecast retail sales data suggest are “more in line with the post Black Friday anecdotes,” David Ader, strategist at CRT Capital, writes in note.
  • "Weakness in the core core area is disturbing; while seasonals play into it, it looks odd to see electronics and non-store retailers (i.e. On line) come in with negatives": Ader

Retail sales ex autos:

SA Initial Claims:

Charts Bloomberg