The U.S. consumer continues to be one of the bright spots in the global economy. Indeed, U.S. consumers continue to spend as if they have plenty of money, and they do. The purchasing power of consumers continues to rise in record-setting territory. Similarly, the U.S. consumer debt service ratio, that is the level of debt payments compared to disposable income, is at the lowest level since the metric began in 1980. The simple reason that U.S. consumers are in such good shape is that jobs are plentiful, and wages are rising. Here is a review of the November jobs report released on Friday.
The good news from the jobs report was that full-time employment rose to another record high during the month of November to 83% household employment. This represents the highest level since 2008. The number of jobs created exceeded expectations at 266,000 new jobs. As we have mentioned previously, the strong jobs market is benefiting low and middle-income communities in a way that has not been felt in many years.
The Federal Reserve has been conducting a series of “Fed Listens” events to learn how representatives from a wide range of industries and groups around the country see the economy. As Fed Chairman Jerome Powell puts it in his November 25th speech, ““Many people at our Fed Listens events have told us that this long expansion is now benefiting low- and middle-income communities to a degree that has not been felt for many years. We have heard about companies, communities, and schools working together to help employees build skills—and of employers working creatively to structure jobs so that employees can do their jobs while coping with the demands of family and life beyond the workplace. We have heard that many people who in the past struggled to stay in the workforce are now working and adding new and better chapters to their lives. These stories show clearly in the job market data. Employment gains have been broad based across all racial and ethnic groups and all levels of educational attainment as well as among people with disabilities.”
Of course, the number of jobs available is not the only story. Wages are also rising as employers continue to compete for workers. Wages, based on average hourly earnings (“AHE”) was up 3.1% during November, which exceeded consumer price inflation by a significant margin. For ‘non-supervisory’ workers the statistics were even better showing a 3.7% increase, evidence once again that the bright jobs picture has been benefiting lower wages workers significantly.
As we move into the year-end shopping season, the jobs picture is a real gift. U.S. consumers are one of the key drivers of the global economy and as their financial strength grows, so does the probability that spending will continue and even increase. Stocks are not cheap, but the economy continues to be strong and there is good reason to be optimistic.