Jobless Claims and Retail sales

Jobless claims hits six year high.  Applications for unemployment insurance rose by a seasonally adjusted 7,000 to 455,000 for the week ending Aug. 2.  This should put an end to people expecting a second half recovery.  We still have a long way to go before things bottom out.

The number of people continuing to collect unemployment benefits went up by 31,000 to 3.3 million for the week ending July 26, the most recent period for which that information is available. That was the highest since early December 2003.

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Against that backdrop, the Fed decided to leave a key interest rate steady Tuesday. The Fed can't afford to cut rates anymore because it could aggravate inflation. On the other hand, boosting rates too soon would deal a blow to the economy and the ailing housing market.

The fed would have decided to keep the rates low regardless.  If the feds were concerned about inflation, they would have stopped cutting the rates, especially the last quarter point cut.  The problem with the fed is they are backward looking.  The problem going forward is not inflation - it's deflation.  We've got deflation in home prices combined with credit contraction.  That spells deflation.

Retail Sales

Walmart's same-store sales, excluding fuel, increased by 3.0% in July.  Walmart also gave a conservative estimate for August sales to be up 1% to 2%. 

Walmart is a discount retailer and it's numbers were not as ugly as other retailers.  Target, another discount retailer, sales fell by 1.2% in July and it forecast another decline in August.

J.C. Penny's same-store slipped 6.5%.  Kohl's July sales were down 10.4%. 

Over all, the numbers were ugly.  Here is Paulson's opinion on stimulus checks just last week.

While many private economists worry that the effect of the stimulus payments will quickly fade, Paulson said the administration expects the stimulus program would continue to support growth in the second half of this year.

2nd half?  It seems it did not even last into July!

 

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