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Despite softer labor markets, August retail sales climbed solidly, with spending supported by rising wages, strong retiree wealth, and future tax refund tailwinds.

What Caught Our Eyes This Week

Retailers Had a Good Summer

August’s retail sales data was solid: Consumers spent $732 billion on retail and food services, which is 0.6% ahead of July and 5.0% ahead of August 2024. For the third straight month, people shrugged off economic uncertainty and softening labor markets, increasing their spending at a respectable rate. It may be tough out there for those who need a job, but with limited evidence of widespread firing and an unemployment rate still at a historically low 4.3%, softer labor markets aren’t an immediate issue for most of the American population. For many of us, it’s more about wages that are still growing faster than the rate of inflation. For baby boomers, who hold roughly half of the nations’ wealth and are beginning to retire en masse, perhaps it isn’t really about labor markets at all, but rather the value of their retirement portfolios (which probably look pretty good at the moment). Looking forward, a strong tailwind for spending is fast approaching as changes in the tax code from the One Big Beautiful Bill Act are reflected in higher tax refunds for many Americans in early 2026.

CHART OF THE WEEK: Advance Retail Sales: Retail Trade, Percent Change, Monthly, Seasonally Adjusted, Cerity Partners, FRED, 09/19/2025

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