The Commerce Department reported on Wednesday, February 14 in its January Retail Sales report from the US Census Bureau that sales decreased 0.3% in January. In addition, they revised December sales figures down from the initially reported 0.4% rise to the same level. This was followed on Wednesday March 14 by another report indicating that sales had fallen by 0.1% in February. After a strong fourth quarter of 2017, this continues a trend of stagnant sales from January to August 2017. Sales during those 8 months had the lowest standard deviation for that time period since data collection began in 1992. To highlight the problem, sales growth was lower than it was before the big market crashes in 1997, 2000, and 2007 or the subsequent recession years of 2001 and 2008. In fact, only 2008, when sales were negative , had lower sales growth from January to August. The interim reports may have sparked a glimmer of hope, but now that the good news from December has been rescinded and January and February have added to the negative trend, these sales reports should take a pause.

Some, like Scott Anderson, chief economist at Bank of the West in San Francisco, have attributed the weakness to bad weather in January that put construction projects on hold and kept consumers away from car dealerships. Perhaps the weather was uncooperative again in February, but I suggest there is an alternative explanation: the deficit of top spenders I’ve written about earlier.

In fact, the slowdown in demand for construction projects and automobiles serves as confirmation of the deficit, since this is precisely what one would expect from a reduction in the population that spends the most. Demographically, the biggest spenders are people ages 46 to 50 whose kids have moved away and no longer have to shell out money for college. These are people who suddenly find themselves with a lot more disposable income and use it to buy big-ticket items like cars, new homes, or a home remodel. A reduction in that population, therefore, would directly affect those industries.

Unfortunately, the impact of this trend is being swept under the rug as rising wages and inflation fears take center stage. Attention now turns to reports from the Department of Labor’s Bureau of Labor Statistics, in which January hourly earnings rose 2.9% year over year compared to a 2.7% rise in December. That was the biggest increase since June 2009. Hourly earnings moderated in February but still rose 2.6%, above the Federal Reserve’s 2.0% inflation target. Regarding inflation, the Bureau of Labor Statistics also reported that its consumer price index increased 0.5% in January, compared to December’s 0.2% increase, although the CPI moderated in February and grew again by 0.2%. The only reason the January and February CPI year-over-year gains remained at 2.1% and 2.2%, respectively, is that some of last year’s big price gains weren’t included in the tabulation.

This is no time to ignore sales figures. Once the shortfall in peak consumers takes hold later this year, sales will be forced to trend downward. Given that the deficit is not temporary but will persist and even worsen in the coming years, the drop in sales will precipitate. On the contrary, the current inflationary pressures ARE temporary. Eventually, we will see less demand for products, more layoffs, lower wage increases, and lower inflation as a result.

Given those prospects, we should be looking at measures aimed at reducing a major economic downturn. Sadly, we’ve been feeding the trough of easy money for far too long, and the Fed is understandably eager to take the punch bowl away from us. What we will see instead are continued Fed rate hikes like the one we saw on March 21, which will drive up borrowing costs for both corporate and government debt. The former will put pressure on corporate earnings even as its top line declines. The second will increase the federal government’s debt payments on our growing national debt, giving it less wiggle room to help during the coming economic storm.