Hit Me Again: Bad News and Increased Consumer Spend Not Noise in the DataTheodore Iacobuzio |
Last week’s U.S. March jobs number (“a punch in the gut” according to former Obama Council of Economic Advisors chief Austan Goolsbee)—in which the economy added 88,000 jobs as compared with expectations of 190,000—compare strangely with consumer spending figures. According to both U.S. government statistics and self-reported consumer trending, U.S. consumers are spending more. The Gallup number alone shows a better than 10 percent gain since January. This in a month when nearly half a million people left the workforce altogether.
What’s going on out there can be traced to a variety of causes. For example, the unemployment numbers of necessity measure individuals, while the unit of spend is not the individual but the household, in Insights’ view. Among those reasons may certainly be consumers’ rediscovery of the credit card as a way to manage household spending and saving.
Twenty percent of U.S. consumers report using credit cards more than a few months ago, according to new research from MasterCard updating Insights’ annual debit/credit work cited above. The same research reveals that 19 percent of U.S. consumers report spending more than one year ago (a five percentage point gain over the previous year’s share), with 32 percent reporting they are spending less—a decline of eight percentage points over the previous year.
Again, the U.S. consumer is in a kind of virtuous circle. His confidence since 2010 is rising—despite dips related to dispiriting news, as in March, when the Cyprus story broke —and this rise in confidence is in part self-congratulatory. Post-crisis U.S. households, partly through smart use of credit cards, have gotten a handle on their spending and savings. And this is in part inducing them to spend more.