State Of The U.S. Consumer For May 2019

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by: Hale Stewart
Summary

The jobs market is very strong.

Wages are finally growing at a modestly faster clip.

Consumer spending continues at a decent rate.

Consumer spending comprises 70% of all U.S. economic activity, making the health of the U.S. consumer vital to growth. Let's see how healthy or not that state currently is.

Jobs Market

The jobs market is central to this question: if consumers can find jobs and wages are rising, there is a greater likelihood that consumer spending will increase. The reverse is true as well. Thankfully, the U-3 and U-6 unemployment rates are near multi-decade lows:

U-3 (in blue) - the more widely reported unemployment rate - is at its lowest level since the 1960s. The less-widely reported U-6 rate (in red) - which includes those marginally attached to the labor market and those employed part-time for economic reasons - is near its lower reported level.

The employment/population ratio - which dipped sharply at the end of the recession (left chart) - has been steadily rising for the last five years (right chart), which means the percentage of people employed relative to the civilian labor force continues to rise.

JOLTS data shows that there are far more openings than hires, which means people looking for work can probably find a job.

The total number of employees (left chart) continues to increase, while the monthly increase in establishment jobs (right chart) continues at a solid pace.

And the four-week moving average of initial unemployment claims - like several other jobs market statistics - is near a multi-decade low.

All this data means that the jobs market is in great shape.

Wages, Income, and Credit

Income gains, however, have been weaker than expected:

Wages for non-supervisory employees are still growing at slower-than-expected rates, especially for a jobs market as hot as the current one.

Income less transfer payments has grown more solidly, but remember that this data includes income from investments along with business-owner income. It's not representative of what most people are experiencing.

Finally, the personal savings rate - which shows the percentage of income not spent and therefore assumed to be put into savings - has been solidly higher.

Finally, consumer credit markets are expanding:

The total amount of consumer loans is expanding at a solid clip.

And mortgage rates are coming down, making housing more affordable.

Spending

Total retail sales (top chart) dipped at the end of last year, but have rebounded. The Y/Y percentage change (right chart) dipped as well, but has since risen. Retail sales ex-autos (bottom two charts) exhibit the same behavior.

Real personal consumption expenditures from the BEA's GDP report continue to increase at a solid Y/Y pace.

Summing up all this data is the University of Michigan Consumer Sentiment number:

Sentiment has rebounded to near its recent high levels.

Conclusion: From the consumer's perspective, it doesn't get much better than this: the jobs market is very strong, which has (finally) led to faster wage increases. Credit is available. As a result, consumers are spending at a decent clip. And the rebound in sentiment supports the idea that spending should increase in the coming months.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.