America’s consumers have been increasing their spending at a decent pace for several years now, but spending growth has fallen short of prior economic recoveries. Accordingly to Moody’s Analytics, year-over-year spending gains have averaged four percent over the past four years, well below the five point four percent growth observed coming out of the two thousand and one recession.
The primary reason for this is obvious – slower income growth. But income growth is now positioned to accelerate. Wage income has already been manifesting tentative signs of improvement. Moreover, the quit rate, the number of workers voluntarily leaving their jobs as a percentage of the labor force has increased significantly in recent months, an indication that more people are successfully securing better jobs that allow them to leave. Historically, about six to nine months after the quit rate increases, wage growth begins to expand more aggressively.
Faster wage growth will benefit many economic segments, including retail trade and the housing market. It will also likely translate into shifting monetary policy and rising interest rates later this year.
