Consumer Spending and Payrolls
• The trend of payroll growth is more important than the actual number
• Both Consumer Spending and Payroll growth is trending higher
• Concerns regarding lackluster Payroll Growth and the subsequent risk to Consumer Spending may fall into "too soon to tell" category
Part of the challenge in an instantaneous society is differentiating what seems to make sense right now and what history suggests is more likely. Conventional wisdom would have us believe that the lack of payroll growth should lead to limited upside for Consumption Expenditures, therefore placing the economic recovery at risk. We looked back to the past two recessions and found that so far, the current relationship between consumption expenditures and payroll growth is normal and trending higher (see below).
FTN Financial's Chief Economist, Chris Low suggests the trend of Employment growth is more important than the actual reading. History seems to back that up and thus far in the recovery, both Employment growth and Consumption Expenditures should be in the early stages of an uptrend. In sum, the concerns regarding forward Consumption Expenditures due to lackluster Employment growth may happen, but until the positive trend in payrolls changes, those fears may prove unfounded.
Consumer Spending and Employment Growth Trending Higher
(Shaded areas represent recessions and Presidential Terms are noted)
Source of Graph: Baseline
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