And now for the bad news.
Although August’s retail sales report was upbeat and will likely allay fears of an imminent, severe slowdown in the world’s largest economy, where consumption is (basically) all that matters, spending at restaurants and bars was flat last month.
That’s notable. Recall that August’s disappointing jobs report showed leisure and hospitality hiring flatlined. More to the point, 42,000 jobs were lost in food services. It was the first decline since the winter COVID wave.
When considered in conjunction with the drop in spending at restaurants and bars (figure below), nobody will blame you for harboring doubts about the services sector.
“While spending on goods was much stronger than we anticipated… the flatlining of spending in restaurants and bars suggest that the broader recovery in services consumption probably faltered,” Capital Economics said Thursday.
On some interpretations, it could have been even worse. “Food service was flat on the month despite Opentable data showing sharp falls in restaurant diner numbers,” ING’s James Knightley remarked.
This probably isn’t tenable. The total shortfall in employment versus February 2020 levels stood at 5.3 million as of August’s NFP report. The shortfall in food services and drinking places is nearly 1 million (figure below).
Goldman, Morgan, JPMorgan and others have all cut their estimates for Q3 US growth over the past several weeks. Goldman is particularly concerned about the consumer, who faces “a harder path ahead.” The Delta variant is widely cited as an aggravating factor.
Meanwhile, jobless claims rose slightly last week. 332,000 Americans filed for unemployment benefits, 20,000 more than the previous week’s upwardly-revised 312,000.
Still, initial claims remain near a pandemic low (figure above).
Continuing claims were 2.67 million for the week ended September 4. As of August 28, ongoing Pandemic Unemployment Assistance and PEUC claims were 5,487,233 and 3,805,795, respectively.
In the weeks and months ahead, we’ll find out whether the expiration of emergency programs forces labor back into the “loving” arms of capital. Job openings in food services stood at a record on the last business day of July.