3/27/15

The business cycle - retail sales and employment showing a major divergence

 
 

What is going on? The above chart shows the growth in employment (red line), reflecting strong growth in the labor market. (Click on the chart to enlarge it).

The second line (blue) represents the growth in retail sales. Do you see the divergence?

Employment is strengthening and growth in retail sales is plunging. Slower growth in retail sales will force business to cut inventories (see a previous post).

There is only on way to cut inventories and this is to reduce production.

Slower economic growth (expected to be 0.2% in Q1 by the Atlanta Fed) is going to be a major headwind for the markets.

The business cycle is alive and well.

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George Dagnino, PhD
Editor
The Peter Dag Portfolio
Since 1977
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