While many economists tried to explain away the 0.8 percent drop in January retail sales as simply a reflection of falling gasoline prices, Lance Roberts, a partner at STA Wealth Management
, sees more to it than that.
"The current level of retail sales is suggesting that the economic environment is significantly weaker than headlines would suggest," he writes in a commentary. "It also suggests that a 5.7 percent unemployment rate is likely not reality."
The economy grew 2.4 percent last year, the highest rate since 2010. "While I am not suggesting that the economy is on the verge of an immediate recession, I am suggesting that the 'conundrum' between lower gasoline prices and retail sales is not really one at all," Roberts says.
"The real story behind the weakness in retail sales suggests that something is amiss within the broader economic backdrop. When combined with the deterioration in earnings, the risk of a 'gotcha' moment in the market has risen markedly."
Average hourly wages rose only 1.7 percent last year, the lowest 12-month increase since October 2012.
Meanwhile, productivity, which measures output per hour worked, slumped an annualized 1.8 percent in the fourth quarter and climbed only 0.8 percent for 2014 as a whole. That pales in comparison to average annual productivity growth of 2.2 percent since 1947.
"It's a major problem," Robert Atkinson, president of the Information Technology and Innovation Foundation, tells USA Today
. Weak productivity hampers corporate profits and wage growth.
And the 391 S&P 500 companies that reported fourth-quarter earnings through last week registered blended profit growth of only 3.1 percent, FactSet reports.
Some experts point at slow business investment to explain the drop in productivity growth. "We have turned into a society that is myopically focused on the short term," Atkinson says.
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