Nominal retail sales up 0.3% in November, last 2 months revised down. Well below expectations & reflects a reduction in inflation-adjusted sales.
BUT, I always like to step back and focus more on what we know than the new increment. And what we know is retail sales remain high.
That last tweet was nominal retail sales. About two-thirds of that increased spending reflects higher prices but one-third reflects people purchasing more. Real sales are converging back to pre-pandemic trends but very slowly. We're way, way, way past pent up demand.
The retail sales release mostly covers goods but it gives us a glimpse of one particular service: food services & drinking places. Nominal sales back on track in this sector but prices are up so real sales are a still a bit off--and have not really risen since Delta emerged.
My favorite in this release is sporting goods, hobby, musical instruments and book stores. Wow that's a lot.
Of course autos are 15X more important for the economy, spending is up in nominal terms but quantities are down.
All in the bean counters are expecting about 7 percent GDP growth (annual rate) in Q4. Would be very, very strong.
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Caveat: PCE inflation was 1.8% over the reference period, lower than it needed to be. And 2.3% would be fine going forward under the existing target. So room to be to the right on the histogram. Just not this far to the right.
(Note the Fed targets PCE inflation which will come in lower than this.)
Here are the full set of numbers. Note the "ex shelter" numbers were much higher in September than the overall. But the reverse was true if you go back further.
Shelter has been particularly volatile in the last few months, probably better to look at the orange line than the blue bars here.
Overall the jobs report is reassuring. A healthy 142K jobs added, average weekly hours increased, participation stayed the same, and most importantly the unemployment rate fell back to 4.2%.
Pace of job growth (adjusting for benchmark revision) mostly unchanged over last year.
Here's the unemployment rate. It is what most people were watching most closely because of difficulties measuring monthly jobs and knowing what numbers for them are hot or cold. It broke from four increases in a row to tick down as the surge in temporary layoffs receded a little.
Reason to be cautious as the Sahm rule is still triggered. I don't find the mitigating arguments fully persuasive (e.g., the increase is due to labor supply not demand or hiring down not firing up). But more important, may simply be like other recession indicators-very imperfect.
1. Do not tax the normal return to capital, instead tax consumption.
2. IF you're taxing capital gains, better to tax a broader base & lower rate with more neutrality, so tax accruals.
I come back to this below, the Platonic ideal may not be achievable in practice. And the "standard" theory may be wrong because it leaves out important considerations. But still, worth taking seriously.
On the second, the argument is that FOR A GIVEN LEVEL OF CAPITAL TAXATION it is better to have a broader base and a lower rate. A [10%] capital gains tax on accrued gains leads to less distortions than a 23.8% tax on realized gains.
Moreover, the relatively little core inflation we've had in the last three months was more than entirely shelter. If you take shelter out then the annual rates are: