High Correlation Between Retail Sales and Job Creation

For the past 19 years, the levels of Real Retail and Food Services Sales and Total Nonfarm Payrolls have had a +0.96 correlation, so it’s hardly an overstatement to suggest this morning’s number bears close scrutiny.

NOTE:  Until 2000, RRSFS (NAIC-basis) was RETAIL (SIC-basis) at FRED.  RETAIL has been discontinued.  The two can be spliced with bit of work, but I believe the chart above tells the story adequately enough.

The NFIB Small Business Economic Trends report is out (7:30 AM Eastern), and the headline to the tease — which is sent out in advance — was not good (emphasis mine):

Consumer Spending Remains Weak

For the third consecutive month, NFIB’s Small Business Optimism Index fell. While the drop was slight—.3 points, with the index settling at 90.9 in May—the index makes clear that optimism is moving in the wrong direction: a recession-level reading for an economy fighting its way through a recovery.  A leading cause of the low reading is the stubborn problem of weak consumer spending, which is especially problematic for services, a sector dominated by small businesses.

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