{"id":22820,"date":"2025-09-18T00:38:11","date_gmt":"2025-09-18T00:38:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/22820\/"},"modified":"2025-09-18T00:38:11","modified_gmt":"2025-09-18T00:38:11","slug":"what-explains-the-divergence-between-us-consumer-spending-and-job-growth","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/22820\/","title":{"rendered":"What explains the divergence between US consumer spending and job growth?"},"content":{"rendered":"

The apparent wedge between US consumer spending \u2014 seemingly in the midst of a mini reacceleration \u2014 and the softening trend in US headline job growth has been a subject of increasing discussion on Wall Street and across financial media ever since we highlighted its importance<\/a> 10 days ago.<\/p>\n

So far, I personally don\u2019t love all the answers proffered on this topic, so I will engage with the wedge.<\/p>\n

The easiest explanation is that the framing here could be much more precise. Call it pedantic (it\u2019s not), but spending doesn\u2019t come from jobs, but rather the income that comes from jobs.<\/p>\n

What I call the US\u2019s \u201cprivate sector national paycheck\u201d (the index of aggregate weekly payrolls) is up 2.8% year to date through August. Personal consumption expenditures are up 1.9% through July, year to date.\u00a0<\/p>\n

Zooming out a little, both of these metrics are up in the mid- to high 4% range year on year. So this may simply be a case where the slowing of headline job growth significantly overstates the slowing of labor income growth.<\/p>\n

(However, I\u2019d be remiss not to note that public sector jobs are poised to take a big hit in the October nonfarm payrolls report \u2014 released in early November \u2014 in light of buyout and severance deals reached earlier this year.)<\/p>\n

And a reminder that higher earners disproportionately drive US spending, and most of the areas where we\u2019re seeing labor market softness are associated with lower-income and traditionally marginalized cohorts<\/a>. <\/p>\n

Beyond this, the importance of labor income to total income has been roughly flat since the end of 2023. One thing that\u2019s gone up is the share of income that is tied to government transfer payments, which is what you\u2019d expect given the aging population.<\/p>\n

On the margin, more consumption is being de-linked from labor over time.<\/p>\n

And, of course, there\u2019s the stock market.\u00a0<\/p>\n

I continue to believe the particular character of the market recovery off its April lows \u2014 a rebound in which retail investors who bought the dip were outsized beneficiaries \u2014 means that the so-called wealth effect<\/a>, or how much a boost in asset prices might be expected to boost consumption, may be unusually potent.<\/p>\n

Beyond that, some tactics used by retail traders (I\u2019d point in particular to call overwriting<\/a>) are income-generating in nature. If an individual investor executes this strategy on their own, rather than through a call-overwriting ETF, they are receiving premiums in exchange for capping their potential short-term upside on a stock (and risk having their position called away).<\/p>\n

Are those premiums being treated as extra dry powder for one\u2019s investment portfolio, or additional available income to spend? Even if the answer is \u201cboth,\u201d well, that\u2019s providing some lift for consumption.<\/p>\n","protected":false},"excerpt":{"rendered":"The apparent wedge between US consumer spending \u2014 seemingly in the midst of a mini reacceleration \u2014 and…\n","protected":false},"author":2,"featured_media":22821,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[114,184,85,46],"class_list":["post-22820","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-il","tag-israel"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/22820","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=22820"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/22820\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/22821"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=22820"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=22820"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=22820"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}