There have been some columns lately attempting to debunk the pro-stimulus, pro-increasing aggregate demand argument by saying that retail sales are at a record high, and therefore it’s ludicrous to say that lack of demand is to blame for the lack of job creation. If it weren’t for the fact that the Obama administration was such a confidence-killer, things would be much better.
Unfortunately the demand-is-great story just doesn’t hold up.
Doug Short has updated two great charts on retail sales to include today’s mediocre data.
The first shows how far we’ve fallen from the trendline.
This is pretty important if you figure that pre-crash, employers were staffed with the assumption (however mistaken) that demand would continue along some basic historic trend. Thus, even if nominally sales have recovered to old highs, it’s obvious to any employer, looking out, that the old growth assumptions weren’t useful, and that they were probably overstaffed.
Photo: Doug Short
The next is even more damning because it shows how mediocre things are on the sales front once you adjust for things like inflation and population growth.
Photo: Doug Short
As you can see, adjusted for population and inflation, retail sales aren’t anywhere near their pre-crisis levels.
Now granted, there’s more to end demand than retail sales, and stuff like investment is very important to the economy too. But the flipness with which some argue that retail sales are at a record high, so therefore the lack-of-demand explanation for poor hiring doesn’t make sense, isn’t called for. Demand is still crap, and if demand were stronger, businesses would need to hire more, however much they hate Obama.
And really, all you have to do is ask businesses.
The latest NFIB survey of small business optimism confirms, once again, that lack of sales is the #1 problem they face.
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