Thank you as always! I have two questions here that have been floating in my brain as a economics/finance layperson. Per the post, consumer spending is still ticking up, but consumer sentiment is falling and continuing jobless claims are also rising. I'm curious, is there a tipping point number that continuing jobless claims could hit that would cause a drop in consumer spending?
I've also listened to some coverage saying that it's mostly higher income folks that are sustaining consumer spending growth. Is consumer spending impervious to the effects of joblessness until higher income folks are the ones who are being laid off and can't find a new job?
Good questions. I'm not sure if there's an exact level of continuing claims that would come with a drop in consumer spending. The fact that they've been rising isn't good, but the move has been relatively gradual. There are also a lot of other factors to consider alongside claims. Having said that, there are a lot of economic metrics that have flattened out or have turned negative. I think the risk of consumer spending growth turning negative and the economy going into recession is as high as it's been in years. (More here: https://www.tker.co/p/economic-growth-slowing-approaches-tipping-point).
Regarding spending being supported by higher-income folks, I don't think we need to see layoffs at that end for spending to turn lower. If low-income consumers are dialing back, then higher-income consumers would have to spend at an increasing rate to offset.
Another thing to keep in mind is that household finances broadly are pretty strong. Not as strong as they were three or four years ago, but much stronger than the historical trends. This has bolstered spending.
But again, I think we're either at or near an inflection point for consumer spending and the economy.
Thank you as always! I have two questions here that have been floating in my brain as a economics/finance layperson. Per the post, consumer spending is still ticking up, but consumer sentiment is falling and continuing jobless claims are also rising. I'm curious, is there a tipping point number that continuing jobless claims could hit that would cause a drop in consumer spending?
I've also listened to some coverage saying that it's mostly higher income folks that are sustaining consumer spending growth. Is consumer spending impervious to the effects of joblessness until higher income folks are the ones who are being laid off and can't find a new job?
Good questions. I'm not sure if there's an exact level of continuing claims that would come with a drop in consumer spending. The fact that they've been rising isn't good, but the move has been relatively gradual. There are also a lot of other factors to consider alongside claims. Having said that, there are a lot of economic metrics that have flattened out or have turned negative. I think the risk of consumer spending growth turning negative and the economy going into recession is as high as it's been in years. (More here: https://www.tker.co/p/economic-growth-slowing-approaches-tipping-point).
Regarding spending being supported by higher-income folks, I don't think we need to see layoffs at that end for spending to turn lower. If low-income consumers are dialing back, then higher-income consumers would have to spend at an increasing rate to offset.
Another thing to keep in mind is that household finances broadly are pretty strong. Not as strong as they were three or four years ago, but much stronger than the historical trends. This has bolstered spending.
But again, I think we're either at or near an inflection point for consumer spending and the economy.