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.
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