Not So Bad Retail Sales Reveal A Deeper Rot

At first glance, the January retail sales numbers weren’t bad.

But even the mainstream media couldn’t help but find a dark cloud.

The more you dig into the numbers, the unhappier the story becomes.

The headline retail sales number for January rebounded a bit from December’s dismal reading.

The media reported that the 0.2% gain beat economists’ expectations, but wasn’t that great.

In fact, Justin Lahart, writing in the Wall Street Journal’s widely read Heard on the Street column was downright gloomy.

“Scratch its surface and it is quickly apparent that the January retail sales report wasn’t as good as it appeared at first glance. Dig a little deeper and it actually looks awful.”

Making matters worse, the Census Bureau revised December’s number, which was already horrible, sharply lower.

The stock market rallied sharply on the heels of the news, because of course, everybody knows that the weaker the economy, the more likely it is that the Fed will ease monetary policy.

And easy money is bullish. Until it isn’t.

But are investors and traders betting on a false narrative? I suspect that the answer is yes.

Quarter Trillion Reasons To Be Bearish

Friday’s jobs report surprised everybody, including me. The headline number came in shockingly below the consensus expectation. The BLS counted just 20,000 new jobs in February. The consensus guess of economists was for a gain of 173,000.

I was especially surprised because February withholding tax collections had gone through the roof, with a year to year gain of nearly 10%. That suggested not a downside surprise in the jobs survey, but just the opposite.

Now we all know that the BLS manipulates the number through the magic of seasonal adjustment. But a miss this big? In the opposite direction of what the tax collections told us they should be?

It’s preposterous. So I took a look at the actual raw data and what I found will make you think twice about the conventional wisdom.

When you look at the chart of the raw, unadjusted survey data, what do you see? Railroad tracks. Nothing has changed. The trend is intact.

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