{"id":301,"date":"2014-08-29T12:23:56","date_gmt":"2014-08-29T16:23:56","guid":{"rendered":"http:\/\/naroffeconomics.com\/?p=301"},"modified":"2014-09-01T23:27:15","modified_gmt":"2014-09-02T03:27:15","slug":"july-income-and-spending","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=301","title":{"rendered":"July Income and Spending"},"content":{"rendered":"

KEY DATA:<\/strong> Inflation Adjusted Disposable Income: +0.1%; Inflation Adjusted Consumption: -0.2%<\/p>\n

IN A NUTSHELL:<\/strong>\u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153The lack of wage gains is keeping consumers from spending more money.\u00e2\u20ac\u009d <\/em><\/strong><\/p>\n

WHAT IT MEANS:<\/strong>\u00c2\u00a0The constraining cycle of minimal wage gains leading to minimal consumption increases continues.\u00c2\u00a0 Households saw their incomes rise modestly in July as the increase in wages and salaries was the slowest this year.<\/em><\/strong>\u00c2\u00a0 Adjusting for inflation, the rise was barely perceptible.\u00c2\u00a0 Real disposable personal income has increased by 2.6% over the year, enough to drive decent but not great consumer spending.\u00c2\u00a0 In July, households decided to go on a shopping vacation.<\/em><\/strong>\u00c2\u00a0 They spent little but some of that may be due to the relatively mild winter that reduced air conditioning needs.\u00c2\u00a0 Utilities are part of services spending and that component, which is two-thirds of all consumption, was flat.\u00c2\u00a0 Also, while vehicle sales were strong, they did not come close to the robust pace posted in June so spending on durables was off sharply.<\/p>\n

Will consumption rebound?\u00c2\u00a0 The likelihood is yes as the University of Michigan\u00e2\u20ac\u2122s Consumer Sentiment Index increased in August <\/em><\/strong>as households are more optimistic about their economic conditions.\u00c2\u00a0 However, they remain somewhat uncertain about the future.\u00c2\u00a0 A sharp rise in the Chicago Business Barometer adds to the indicators showing that the manufacturing sector is improving.\u00c2\u00a0 That is likely being led by better consumer spending<\/em><\/strong>, even if the government is not yet finding that is happening.<\/p>\n

MARKETS AND FED POLICY IMPLICATIONS:<\/strong> We need better consumer spending but we cannot get it until wages actually rise.\u00c2\u00a0 This is the trap we are in and it is not resolving itself quickly.<\/em><\/strong>\u00c2\u00a0 Indeed, businesses remain convinced they can get the perfect candidate at the price they think they should pay despite the growing number of job openings.<\/em><\/strong>\u00c2\u00a0 The disconnect in this economy is between what an employer wants to pay and what an employer needs to pay to get the worker they want.\u00c2\u00a0 In the business community, which is a firm believer in the market economy, there is a belief that the labor market doesn\u00e2\u20ac\u2122t follow the laws of supply and demand.\u00c2\u00a0 In economist\u00e2\u20ac\u2122s parlance, employers think that the labor supply curve is flat so they can pay a constant price for any number of workers they want.<\/em><\/strong>\u00c2\u00a0 The high unemployment rate of the past six years allowed that concept to take hold since it was basically accurate.\u00c2\u00a0 But with excess labor supply diminishing, a normal shaped labor supply curve is reappearing and that means to get more workers, you have to pay more.\u00c2\u00a0 If you don\u00e2\u20ac\u2122t, the opening will go unfilled.<\/em><\/strong>\u00c2\u00a0 Markets work, even the labor market, and while wages may be sticky downward in a recession, as we approach full employment, they will go up.\u00c2\u00a0 The longer businesses take to recognize that wages need to be increased, the faster they will likely rise when that recognition sets in.<\/em><\/strong>\u00c2\u00a0 On that positive note for workers let me say:<\/p>\n

Have a safe and enjoyable Labor Day Weekend!<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: Inflation Adjusted Disposable Income: +0.1%; Inflation Adjusted Consumption: -0.2% IN A NUTSHELL:\u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153The lack of wage gains is keeping consumers from spending more money.\u00e2\u20ac\u009d WHAT IT MEANS:\u00c2\u00a0The constraining cycle of minimal wage gains leading to minimal consumption increases continues.\u00c2\u00a0 Households saw their incomes rise modestly in July as the increase in wages and salaries … Continue reading July Income and Spending<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[41],"tags":[],"class_list":["post-301","post","type-post","status-publish","format-standard","hentry","category-income-and-spending"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/301","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=301"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/301\/revisions"}],"predecessor-version":[{"id":302,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/301\/revisions\/302"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=301"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=301"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=301"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}