Increased Consumer Spending - 3/11/14 | WYPR

Increased Consumer Spending - 3/11/14

Mar 11, 2014

According to an analysis by Moody’s Analytics, American consumers are poised to increase their spending.  After years of holding back, there is pent-up demand for many goods and services.  Household balance sheets have improved as many have refinanced mortgages and paid down total debt.  Employment gains nationally have been in the range of 1.7 percent per year for the last two years, with the nation adding not quite 200,000 jobs per month last year.  

Historically, that pace of job growth would be associated with wage and salary income growth exceeding 5 percent in the aggregate.  But over the past 2 years, gains have average only 3.7%.  That lack of income growth continues to suppress consumer spending momentum.  Many economists attribute the lack of income growth to a high unemployment rate, which gives employers relatively greater bargaining power. 

Some workers may be thankful merely to have a job and do not feel positioned to demand higher wages.  This dynamic at least partially explains the widespread calls for higher minimum wages, including in Seattle where newly elected Mayor Ed Murray ordered his administration to develop plans to pay all city workers at least 15 dollars per hour.