Quoth the Census Bureau: "The advance estimates are based on a small subsample of the Bureau's full retail sales sample. Estimates from the advance and the subsequent full survey can differ because of the earlier reporting in the advance and because of sampling variability present in both surveys." In other words, check back with us in a couple months and we'll have a better number.

But sometimes, if we look at changes in an indicator over a longer period, the magnitude of the change is larger than the uncertainty in the reading, and we can obtain useful information. For instance, from May of 1995 to May of 1996 the change in retail sales was 5.5 percent (+/-1.9%). So we know for sure that retail sales rose over the past 12 months. Moreover, that rise was at least 3.6 percent and may have been as large as 7.4 percent. Another advantage of the year-over-year data is that it nulls out month-to-month swings in the sales data due to the highly-variable auto sales component.

We can get a perspective on the significance of the May number if we examine the behavior of the year-over-year data over the last several years. In the depths of the 1990-91 recession, this indicator dipped as low as -2 percent. From there, it advanced to a peak level of +11 percent in early 1994. At that time the Fed decided the economy was overheating and began a series of interest rate hikes. Retail sales went into a downtrend that bottomed last October at an annual growth rate of about +3 percent. Since then, annual sales growth has trended upward to the present level of 5.5 percent. The pickup since last October indicates that, indeed, economic activity is on the rise. But, the annualized growth rate for retail sales would need to double from its present value before it would reach the level where the Fed put on the brakes back in 1994.

~~~~~~~~~~~~~~~~~~~~

In other news today, the Labor Department's Employment and Training Administration announced that during the week ending June 8 the number of new claims for state unemployment insurance rose from 354,000 to 360,000. This was 10,000 more than Wall Street analysts had estimated.

For the week ending June 8, the four-week moving average also rose, moving from 349,000 to 351,000 for the second consecutive weekly rise.

Three weeks ago I questioned how much further down unemployment claims could go. Then, two weeks ago claims rose by 1000 and the four-week moving average only declined by 500. Last week claims jumped up by 9,000 and the moving average rose by 3,500, and this week claims rose another 6,000 and the moving average advanced by 2,000.

The several-week downtrend in new claims that preceded the recent up move turned out to be a harbinger of the upsurge in nonfarm payroll employment during May. Perhaps the behavior of new claims in the past few weeks is warning us that the number of new jobs that will be created in June will fall short of the May number.

Byline: Lafferty (MF Merlin)