American consumer spending rose under one percent .6% in November, but last month it was little higher, the October’s increase was 1.7%. So spending is trending up. However, the press is reflexively reporting the new data with downbeat phrases like, “spending slowed”; like it was a bad thing.
In contrast to the press this morning I see some good news in this month’s spending numbers from the Commerce department.
American consumers don’t look that unhappy; despite the end of substantial income support from the government — the extra unemployment insurance checks and the looming end of the child tax credit — consumers are still spending and they’re spending a lot.
The spending numbers were already up in October and consumers already spent over $100 billion last month. Consumers went into debt a bit in November, surely buying holiday presents. Though, I acknowledge, consumers may not be all that happy; consumer confidence nudged down a little bit last month.
Savings In Normal Range
Looking a little deeper into this morning’s Commerce Department report on spending I see that personal savings, as a percentage of disposable personal income, is still pretty high, at 6.9%. The savings rate is little lower than it was in the dark days of Summer 2020, when households saved 26% of their income, and lower than April 2021 when households saved 12.6%. Now the saving rate is in normal ranges.
Pay Increases To All The Right People
The other news that might predict good news in the next few months is that wage and salaries are not increasing like they had been, and the big increases are in the lowest-paid occupations. That is good news for an economy that is leading, and shamefully has led, wealthy nations in producing low wage jobs. Over 23 percent of jobs in the US are low-wage compared to the OECD average of 13.9% and the Netherlands at 6.4%, Italy at 4.2%. Even in Chile, only 11.8% of Chilean jobs are considered low wage.
That American retail, leisure, and hospitality jobs are paying more could mean an healthy boost of aggregate demand in all the right places for all the right people. Local neighborhoods may be the first to benefit which may help fuel the small business sector. An economy needs adequate income from the nation’s workers to spur investment and create healthy communities.
Inflation May Subside
And, as a bonus, pay increases in the lowest paid sectors just isn’t enough to bring widespread inflation in the economy. Besides the business sector has a long way has a lot of running room to soften create price hikes since profit have increased steadily this year.
A few weeks ago, the Bureau of Labor Statistics posted that average weekly earnings increased from October 2021 from $1073.97 in the private sector to $1079.84. Average hourly earnings increased from $30.95 in the private sector to $31.03 in November 2021, again in the private sector.
Macroeconomically speaking the anemic and targeted wage increases in the low paid sector may suggest that inflation is not being baked in as wage push inflation period since profits are so high; I will expect retailers to put a hold on price increases if demand stops starts to slough off or if consumers substitute high-priced items, like meat 2 areas that have hardly had any price increases like grains and beans.
Signs Of Recovering
I compare today to the the dark days of 2009 to see what Christmas was like then. Then consumers matched the increase in consumer spending with their increases income, coincidently also in 0.4 percent. Consumer confidence was lower then compared to now as we emerged from that last severe recession.
Overall, it looks like we’re ending the month with news that can justify predicting a slow and stable recovery.