Following last week,’s announcement that the United States economy was bouncing back, with employment rising by 165,000 and unemployment dropping to 7.5, our Head Economist Richard Nicholls ponders the resilience of the US consumer and the potential impact this will have on the global economy…
Last week’s good employment statistics were the latest sign of resilience from the US economy and the American consumer. Employment rose by 165,000 in April, well ahead of population growth; and while the number of government jobs fell by 11,000, the private sector created some 176,000 jobs. 73,000 of these were in professional and business services.
This follows good data on consumer spending in 2013. Despite the increase in payroll taxes as part of the fiscal cliff deal, and now the government cuts mandated by the Sequester, consumer spending has kept rising in real terms month-on-month (0.2% in January, 0.3% in February and 0.3% in March). This is despite aggregate real disposable income falling by 3% since the end of 2013, largely a result of tax increases.
What has happened? A fall in the saving ratio – this now stands at 2.7% as of March, down from an average of 3.9% in 2012. The American consumer so far has absorbed the payroll tax increase. (In contrast, the saving ratio in the UK is around 7%.)
The continued resilience of the American consumer will be crucial to global economic prospects – while more work is needed, there is growing evidence that the US economy is slowly recovering. Only time will tell what impact this has on the global stage – but this could well be a time for cautious optimism.
For more US, UK or global economic data or predictions, including country-specific economic snapshots please contact the Future Foundation on 0203 008 4889.