Better Retail Data Doesn’t Guarantee Fed Rate Hike
On May 13th I spoke with Neil Cavuto on the Fox Business Network about the impact of the recent retail sales report on a potential rate hike by the Federal Reserve. My concern is that employment isn’t nearly as strong as the headlines would lead one to believe. FoxBusiness.com wrote an article about my discussion as well as some points made by my co-author for Cocktail Investing, Chris Versace, which you can read here.
In the fourth quarter of 2015, productivity declined by 1.7% then fell again in Q1 by 1.0% while labor input rose 2.5% and non-farm business output averaged around 1%. That means from last October through March, the aggregate hours worked outpaced production 2.5 to 1 – obviously that is unsustainable.
If we look at Challenger’s reported layoffs for the first four months of 2016, we see they were up 24% over the first four months of 2015 and the highest we’ve seen since 2009. In April alone layoffs were up 35%, so the pace looks to be accelerating.
This is the fifth quarter of falling sales and the fourth quarter of an earnings recession, what exactly would drive more hiring when the employees companies currently have are delivering declining productivity?
The three month moving average for retail sales is still at recessionary levels AND today, 47% of Americans don’t have enough savings to cover a $400 emergency! How’s that recovery working for you?