Scary Charts! What Do They Mean?

I found these alarming charts on Barry Ritholtz's The Big Picture blog. They track the impact of the Great Recession on real retail sales (worst in the last half century) and state government tax revenues (worst in the last half century). What are the implications?

Retail Sales: 5 Recessions

State Tax Revenues (1964- 2009)

The first graph is alarming because we still haven't seen the peak of unemployment and it seems unlikely to me that you can have a long-term recovery in retail if a growing number of Americans are without steady paying jobs. When I compare the above retail graph to this graph of total job losses in the last five recessions, it seems to me that when the economy starts to recover jobs, the retail slump begins to reverse a few months later. If the Great Recession's recovery follows that trend, we'll likely bob around in the trough of retail sales until the middle of 2010.

The second graph is equally alarming, but it shouldn't surprise anybody who's been following the stimulus, which has basically operated as a crutch for state spending in its first year. A lot of stimulus critics like to ask, "Where is that $787 billion going, and why aren't we creating lots of private sector jobs?" Well, about 70 percent of the non-tax stimulus has gone to rescue Medicaid and state budgets precisely because, as this graph shows, the drop-off in state tax revenue is critical and unprecedented.