Americans Spending Like They Won The Lottery

Americans Say They’ve Lost Confidence In The Economy, But They’re Spending Like They Won The Lottery

Oct. 19, 2021   By Jeffry Bartash 

Consumers have plenty to spend – and the desire to do so – after big income gains during pandemic.  Americans say they are more anxious about the economy, but they are spending record amounts of money as if they have no worries at all.  The trajectory of consumer spending — which amounts to 70% of of everything that goes on in the economy — is pivotal to the strength of the U.S. recovery. Can it continue at a rapid pace or will it peter out soon?

Many analysts predict consumer spending will start to fade by early next year and lead to slower U.S. economic growth, particularly with Congress and the Federal Reserve throttling back on emergency stimulus. High inflation is adding to the burden on consumers.

Yet others counter that a huge pile of savings and higher household wealth are enough to keep consumers spending and the economy humming through next year. So far consumers have shown no willingness to cut back, they point out.

“There is no demand problem in the U.S.,” said Neil Dutta, head of macroeconomics at Renaissance Macro Research.

Emerging problems

By some measures, it would be easy to think the U.S. economy is headed for a rough spell. After all, businesses are handcuffed by major shortages, inflation has soared and emergency aid from Washington is drying up. The surge in coronavirus delta cases didn’t help, either.

Yet the main driver of the growth — the American public — is still acting very optimistically even as people tell pollsters they have lost confidence in the economy They are still spending large sums of money and show little sign of pulling back.

A pair of recent reports underscored the resiliency of U.S. households and the broader economy. Start with the astonishing trend of of people quitting their jobs in record numbers during a pandemic.

A record 4.27 million people quit in August, almost 3% of the entire workforce. People quit in greater numbers when they think they are financially secure, that the economy is doing well and that they can find a better-paying job.

Sure enough, that’s what is going on.

A growing labor shortage has forced companies to compete for workers. They are offering bonuses, higher pay and better benefits to attract employees, in many cases poaching them from rivals.

“Employers are no longer calling the shots and the balance of power has clearly shifted in labor’s favor,” economists Aneta Markowskia and Thomas Simons of Jefferies LLC wrote in new report. 

“Employers are no longer calling the shots and the balance of power has clearly shifted in labor’s favor.”

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