Two of the key macro data trends we want to be paying close attention to in order to know how, when, and if there is a recovery, are jobs and consumer sentiment.
Tomorrow we get several releases from the height of the pandemic on job openings and consumer sales. This will give us some clear insight into how the COVID-19 situation is evolving.
We can expect the April data to be key because it’s from what we hope will turn out to be the worst month for the economy. Barring a second wave, hopefully from here, it’s a climb back to normal.
Part of getting a handle on what to expect from a recovery is knowing how far down things have gone. If all goes well, that’s the data we’ll be able to analyze tomorrow.
What We Are Looking For
We can expect retail sales figures to be the driving force behind the market for the rest of the week. Many retailers had better than expected sales in March because of panic buying, but that’s not the case in April.
In fact, we expect to see the full measure of how much lockdowns affect consumer spending, and by extension, the economy.
Projections are for retail sales to have dropped -10.0% in April, which would be on top of the -8.7% in March.
If we exclude the more volatile auto market (with the vast majority of dealers closed for the whole month), projections are for retail sales ex-auto to have fallen by -8.6% on top of the -4.5% in March. The control group largely doesn’t move the market but analysts also expect it to fall -3.9% compared to +1.7% in the prior month.
Already last month’s Retail Sales reading was the worst on record. It nearly doubled the worst loss seen during the 2008 recession.
However, expectations are for tomorrow’s data to be even worse. The total loss of sales in the last two months is likely to be well beyond the total loss of sales during the entire 2008-2009 recession.
Normally retail sales are considered in the context of inflation and Fed policy. On Wednesday, the market took a turn for the worse after Fed Chair Powell said he expected the economy to be affected for an extended period of time.
One or two percentage points difference from expectations in retail sales isn’t going to change that outlook much.
Where to Get Growth
As the Fed continues to push record amounts of liquidity into the market, and the US government prepares another record-breaking spending package, the problem isn’t a lack of money.
In order for people to buy things, they have to be made. Factories are closed, and people are increasingly worried that they won’t be able to return to work. Cold, hard cash is just a facilitator of the economy. It is no replacement for actually providing the products and services people want and need.
With that in mind, the JOLTS job openings might be the most interesting data to come out. Right up until March, there were more job openings than there were people unemployed in the US. That has changed.
But, as long as the number of job openings remains somewhat upbeat, people might still feel they can find employment. The possibility of a quick recovery might evaporate quickly if there is a significant JOLTS drop.
Current projections are for there to be a minor decrease in line with the nearly year-long trend in job openings to 6.84M compared to 6.88M in March.