As Long as Paychecks Keep Coming, Spending Can Hold up

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Despite weak overall sentiment, consumers don’t seem concerned about their job prospects

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Spending also outpaced the 0.4% gain in personal income. As a result, the savings rate—the share of people’s disposable income at the end of the month—falled to 4.4%, the lowest level since 2008. Americans have accumulated substantial savings since the pandemic began, so the low savings rate is not a sign of consumer oversupply during the 2000s, but it is a sign of increased spending despite rising prices and the depressed attitude of many. shows.

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Apparently this month is still shining. The University of Michigan reported on Friday that Its consumer sentiment index is 58.4 . fell to From 65.2 in April in May, to its lowest level since August 2011, when Congress’ debt-limit performance darkened the mood. For only the second time in recent memory the measure of sentiment has been so low, in the wake of the 2008 financial crisis.

Emotions can be pushed around by a number of factors, from falling stock prices to the most recent headline news. It has become increasingly marked by a partisan divide, with views of Republicans and Democrats on the economy dependent on who is in the White House. In the end, there is still a pandemic going on, and even though concerns over COVID-19 have faded, it doesn’t really create a happy atmosphere.

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Meanwhile, what may be one of the most important elements of sentiment – ​​what people think the job market is going to do – isn’t exactly glowing red, though it has weakened.

The unemployment expectations index at the University of Michigan fell from 96 in May to 109 in April (lower levels indicate that a greater proportion of people expect unemployment to rise, versus a decline in the following year). That’s a significant drop, but it only brings it down to its average level in 2019 – a year when the economy added nearly two million jobs.

One thing that’s helpful to ask people where they think unemployment is going can help get them out of their heads: Instead of staying, say, war in ukraine, they can imagine how many help-seeking ads they see in their city. Then there’s the simple fact that the more confident you are that your paychecks will keep coming, the less likely you are to start to economize.

The job market is still looking good—May’s employment report is due out next week, and it looks like it’ll be another strong one. The real challenge for consumers and the economy will be if that changes.

Credit: www.wsj.com /

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