Weekly Chain Store Sales SlipFollowing Several Lackluster Weeks

It appears that consumer malaise continued early this month. During the latest week, chain store sales slipped 0.1% after having been roughly unchanged during October and down moderately in September. Nevertheless, the sharp down-trend in sales of earlier this year appears over.

The ICSC-Goldman Sachs retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.

During the last ten years there has been a 69% correlation between the year-to-year growth in chain store sales and the growth in general merchandise retail sales. The weekly figures are available in Haver's SURVEYW database.

Prospects for an improvement in sales continue to appear limited. The leading indicator of sales has been roughly unchanged since the spring of this year. On the other hand, a backslide in spending also seems unlikely. The sharp declines of the leading indicator of sales from 2007 to early-2009 are over.

This composite leading economic indicator is compiled from four series: (1) the MBA's volume index of mortgage applications
for home purchase (2) the ABC News/Money magazine's survey of consumer buying conditions (3) new filings for jobless benefits and (4) the 30-year government bond yield.

Employment growth: Cyclical movements or structural change from the Federal Reserve Bank of Chicago is available here .

The Current State of the Economy and a Look to the Future (With Reference to William ‘Sidestroke’ Miles, W. Somerset Maugham, Don Ameche and Kenneth Arrow) is the title of yesterday's speech by Dallas Fed Governor Richard W. Fisher and it can be found here

The Bureau of Labor Statistics reported in its Job Openings & Labor Turnover Survey (JOLTS) that job availability improved during September by 2.4% from August. The rise in the number of job openings followed a 0.6% August uptick that was revised from the initial report of a slight decline. Despite these improvements, however, openings were off 25.9% from September of last year. The series dates back to December 2000.

Factory sector job openings rose sharply for the second consecutive month but they remained down 42.4% y/y. The recent rise in the actual number of construction sector job openings paused last month. Though still down 59.2% y/y in September, openings were roughly double the series' low reached in February. The level of professional & business services job openings posted its second consecutive monthly gain (-25.2% y/y) and education & health sectors job openings (-12.3% y/y) reversed most of an August decline. Openings in retail trade have risen slightly from their April low (-9.8% y/y) while government sector job openings reflected reduced tax revenues and fell to a new series' low (-38.1% y/y.

The job openings rate rose slightly from the series' low reached this summer to 1.9%. These rates were down from more than 3% in 2007. Recent gains have been led by the factory & construction sectors. The job openings rate is the number of job openings on the last business day of the month as a percent of total employment plus job openings.

The hires rate held steady at 3.1%, up slightly from the May-June low of 3.0%, and still was nearly the lowest in the series' short eight year history.The hires rate is the number of hires during the month divided by employment.The actual number of hires also was off its low but was still down by 11.0% year-to-year. Factory sector hiring recently has picked up slightly but remains off 14.1% y/y while construction sector hiring has moved sideways since the winter (-3.3% y/y). Leisure & hospitality industry jobs fell 6.0% to a new series' low (19.8%) as did retail sector hiring (-19.1%). In the professional & business services industry hires slipped after two strong monthly gains (-11.2% y/y) while jobs in the education & health services jobs gave back the July increase but remained up 3.6% y/y.

The job separations rate remained at the series' low of 3.3% with the actual number of separations off 11.2% year-to-year. Separations include quits, layoffs, discharges, and other separations as well as retirements.

The JOLTS survey dates only to December 2000 but has followed the movement in nonfarm payrolls, though the actual correlation between the two series is low.

A description of the Jolts survey and the latest release from the U.S. Department of Labor is available here and the figures are available in Haver's USECON database.

Japan’s machinery orders rose by 6% in September. Core machinery orders spurted by 10.5%. Foreign demand is the whole of the pickup as domestic orders fell by 5.4% while foreign orders rose by 25.9% both in September.

The three month metrics show that core orders are still not out of the woods; their three month growth rate is just 2.9% annualized the same as their six month growth rate. Still these two horizon growth rates are better than the -21.8% Year-over-year performance. Core machinery orders are no longer falling but they are not rising very rapidly.

The same sort of shortfalls exist across countries

Moreover Japan like Germany is benefiting from external growth. Over three months, foreign demand is up at a 180% annual rate that is an acceleration from a 60.4% annual rate over six months and those numbers reverse the 42% drop in foreign demand Yr/Yr. Still, domestic demand is wanting. Over three months it is up at a 19.9% pace, better than the -1% rate over six months, and that is an improvement from the drop of 14.9% Yr/Yr.

On balance Japan’s orders are on the mend. Even domestic orders are showing a push into positive territory. But these series are very volatile and given the volatility the recent domestic growth figures are not very impressive. Much more impressive is the growth in foreign orders that seems to be jumpstarting Japan as a whole.

As the global economy turns to recovery one key challenge is going to be to see if surplus and deficit countries begin to make adjustments. Note that Japan and Germany, traditional exporting powers, continue to get a lot of their stimulus from overseas. China’s trade surplus was up this month. How is the US going to keep the lid on its deficit if everyone else is running surpluses? Large structural trade imbalances and the persisting investment flows they imply was one of the main sources of instability in this past cycle. Is anything going to change?