Bad has gone to much worse.
On Friday the U.S. Department of Commerce reported that U.S. retail sales fell by 2.4 per cent in September. That's how much spending was down over one month, not one year. Analysts had expected to see a decrease of 0.8 per cent for the month. The decline was the largest on record.
Sales in August were up by 0.4 per cent. A gain in that range used to be called modest, but now looks spectacular.
Yes of course, much of the decline came because of the Sept. 11 effect. People were watching television, not doing back to school shopping. Even when they could not watch any more, they did not feel like going to the mall.
Problem is that the Sept. 11 effect is not about one month.
We know that employment dropped by nearly 200,000 in the United States in September. That is not going to bounce back in October. In fact, if the recent slew of layoff announcements is any indicator, the job losses are going to get worse. And one of the closest correlations out there is one between employment and spending.
So the third quarter looks bad. And the fourth quarter looks bad too. In fact, the whole thing looks like a recession.
Question is, will it be a long recession or a short one?
Any other time, we could talk about a sharp "V-shaped" recovery for 2002. After all, nine rounds of rate reductions from the U.S. Federal Reserve should buy something. But the problems going on right now are not the kind that can entirely be fixed by low interest rates.
Not that the monetary authorities should stop trying. The Bank of Canada gets its chance in a couple of weeks. Look for them to cut interest rates by 50 basis points when they meet on Oct. 23.
And look for more volatility and more bad news. If there is an upside to that, it may be that the market is getting harder to shock. Bond yields only dropped by a few percentage points on Friday's release.
Stay tuned.
Linda Nazareth is ROBTv's resident economist.