PYMNTS Intelligence has documented that the Labor Economy remains central to U.S. growth, acting as a contributor to GDP, job creation and retail demand. The Labor Economy represents 36% of the workforce and 15% of spending.
And while inflation and tariffs continue to test budgets, consumers are proving that adaptability defines their response to higher prices.
Credit Growth Steadies
Federal Reserve G.19 data released Friday shows that in September, consumer credit increased at an annualized rate of 3.1%, rebounding from a modest 0.7% rise in August. For the third quarter, credit expanded 2.7%, matching the pace seen in the second quarter. Revolving credit, which includes credit cards, rose 1.5% after declining 5.6% in August, while nonrevolving credit such as auto and student loans climbed 3.7% — the strongest gain of the year.
The slower, steady pace of credit growth suggests not a retreat but a recalibration. Consumers continue to borrow, but perhaps more deliberately, balancing credit management with the need to sustain household spending power.
Credit Behavior Reflects Discipline
PYMNTS Intelligence data from the Labor Economy series show that the average consumer carries $4,880 in credit card balances, compared to $3,861 for Labor Economy workers. But despite lower balances, Labor Economy consumers are more likely to revolve their debt: 35.7% said they always or usually carry a balance, versus 31.2% overall.
Just 46% of Labor Economy consumers said they rarely or never revolve credit, compared to 52.1% of consumers in general, while 17.5% occasionally revolve. That pattern indicates at least some flexibility rather than strain as households using credit as a short-term bridge to manage income volatility.
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Data from PYMNTS Intelligence research show how consumers are adjusting to persistent price pressure. In grocery spending alone, 59.8% of transactional or Labor Economy consumers reported making fewer purchases of “nice-to-have” items, compared to 54.1% of consumers overall.
More than half of Labor Economy consumers (53.9%) said they are waiting for sales, 52.9% are cutting back on non-grocery retail, and 49.5% are buying from lower-priced merchants. About 47% said they have shifted to lower-quality products to stay within budget.
Retailers, meanwhile, are adapting their playbooks to the same inflationary reality. As PYMNTS reported, brands such as Coach and Therabody are scaling back markdowns as tariffs and inflation drive up production costs.
Consumers Stay Flexible
Separate PYMNTS Intelligence data shows that payouts, installments and pay-over-time products are becoming a preferred strategy for managing these expenses. In a recent column, PYMNTS CEO Karen Webster noted that faster payouts to workers (including gig economy workers) can be a catalyst for commerce. “For this workforce, the timing of when they get paid is as important as the amount of their paycheck. When they earn and spend, local economies thrive. When they pull back, the ripple effects reach every corner of Main Street,” she wrote.
And as noted from data in “Installment Plans Becoming a Key Part of Shopper’s Toolkit,” a PYMNTS and Splitit collaboration, 60% of shoppers used these installment plans to buy consumer goods in the past year, with younger age groups exhibiting even higher use. For retailers, that means holiday demand will look different, but not disappear.