Retail sales reports promise more clues to growth

After last week’s solid national employment report — 215,000 jobs created in July and an unchanged jobless rate of 5.3 percent — some economy watchers are saying the momentum on interest rates is once again swinging toward an increase by the Federal Reserve in September.
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After last week’s solid national employment report — 215,000 jobs created in July and an unchanged jobless rate of 5.3 percent — some economy watchers are saying the momentum on interest rates is once again swinging toward an increase by the Federal Reserve in September.

“The job creation to date is sufficient to give them the green light,” Chris Rupkey, chief financial economist at Union Bank in New York, told the Los Angeles Times.

Enhancing the views of experts bullish about a rate increase was that average hourly earnings increased by 5 cents, to $24.99, in July. They had fallen by one cent the previous month and have been slow to rise since the Great Recession ended.

Are consumers spending more as their income rises? That question will receive a partial answer this week as the Commerce Department delivers its report Thursday on July retail sales and as four department stores — Macy’s, Kohl’s, Nordstrom and J.C. Penney — issue second-quarter earnings reports during the week.

The New York Times reports that analysts are looking for only modest results from the four store chains, citing factors that include few products that are considered must-haves. The newspaper has higher hopes for the government’s retail sales report, forecasting a solid rebound after a weak June.

Other reports due this week include the preliminary Reuters University of Michigan report on consumer sentiment for August, set for release on Friday.

The Labor Department’s July jobs report had a number of heartening features that the Fed surely wanted to see. Not only did the economy create more than 200,000 jobs for the 15th time in the past 17 months, but the average monthly job gain is now 246,000 during the past 12 months. Job gains for May and June were revised upward — in May from 254,000 to 260,000 and in June from 223,000 to 231,000. In July there were gains in retail trade, health care, professional and technical services, and financial activities.

“Trend job growth is rock solid,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, told Bloomberg. “It’s more than sufficient to continue to chip away at the slack that’s left in the job market.”

Atlanta Fed president Dennis Lockhart said in a speech Monday that a decision by the central bank to raise rates could occur soon.

"I think the point of 'liftoff' is close," Lockhart said in a speech to the Atlanta Press Club, according to a Reuters report. "The economy has made great gains and is approaching an acceptable normal ... conditions are no longer extraordinary."

He later told journalists he was "very disposed" to a rate increase at the Fed's September policy meeting, but said subsequent boosts should be gradual.

Reuters said Lockhart is regarded as a centrist and possible swing vote on the Fed policy committee. His steadily firming language about the economy has served as a barometer of the central bank's willingness to take the leap.

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