Checking In On The U.S. Consumer

Summary

• The health of the U.S. consumer is just fine, despite many economists worrying that spending might slow in 2024 and lead to a recession.
• Analysts are fretting that the consumer could stumble as college loan payments resume and several million lose Medicare benefits while state rolls are recertified.
• These concerns, from student loans to high interest rates, are not the primary factors determining the health of the consumer. They are overwhelmed by the robustness of the U.S. jobs market.

RealPeopleGroup/E+ via Getty Images

By Blu Putnam

At a glance

• Job openings in the United States are off their peak post-pandemic level and appear to be receding toward pre-pandemic levels.
• Unemployment remains under 4%, only rising a few notches in August, and is a healthy sign that more people are returning to the labor force.

The health of the U.S. consumer is just fine, despite many economists worrying that spending might slow in 2024 and lead to a recession.

Analysts are fretting that the consumer could stumble as college loan payments resume and several million lose Medicare benefits while state rolls are recertified.

Other analysts focus on the stickiness of core inflation around 4% and that interest rates may remain elevated for a long time, given the possible lags in monetary policy. These are all valid concerns, which are likely to exert a slowing influence on the economy.

But these concerns, from student loans to high interest rates, are not the primary factors determining the health of the consumer. They are overwhelmed by the robustness of the U.S. jobs market.

If people have jobs, then they will have money to spend. Maybe it won’t be as much money as they want, but having a job is the primary key to personal consumption.

The U.S. economy has been creating over 150,000 net new jobs per month, which is in the same territory as the average of 169,000 jobs a month recorded back in 2019 before the pandemic hit.

While job openings have receded from their peak, there are many more job openings than unemployed people.

Unemployment remains under 4%, only rising a few notches in August, and is a healthy sign that more people returning to the labor force.

Our contention is straightforward: If there are more people working every month and wages are rising, then there is more money available to spend every month, and consumer spending can keep going despite some headwinds.

Original Post

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Comments

[terryongarland]

Or maybe we are in the sweet spot of declining supply concerns and a growing wage/price spiral. The consumer is ok , but everything is moving against consumers as far as prices. Inflation is going to haunt us.

[New Deal Democrat]

The contention that jobs lead consumer spending is simply 100% wrong. In fact the reverse is true. Here’s what the last 30 years look like on a graph, but the data and the relationship go all the way back to 1948:
fred.stlouisfed.org/...

Real aggregate wages, on the other hand, *do* lead spending. Every recession in the past 50 years except the pandemic was preceded by a decline in the aggregate purchasing power of nonsupervisory workers.

[OverTheHorizon]

Robustness of the U.S. job market?

“Job market slows as more people are looking for work”
www.nbcnews.com/...

[moneymaxstonks123]

@OverTheHorizon Only for highly skilled and educated workers is what the article states. The confidence of employees in the job market is somewhat alarming.

[OverTheHorizon]

@moneymaxstonks123 haven’t they been buying the houses, filling the malls and holding up the economy for the last 20 years?

[moneymaxstonks123]

@OverTheHorizon good point

[Patrick5500]

Local shopping mall wity high end designers is packed