The US’s service sector, consumer spending, and labor market steal the economic spotlight after booming significantly in the month of July. Following disappointing reports for both job growth and manufacturing, The Institute for Supply Management’s (ISM) non-manufacturing index continues to expand despite slight dips during July. This can be primarily attributed to the fact that solid job and income growth, low gasoline prices and healthy balances are boosting consumer confidence.
This boost in consumer confidence is resulting in a significant increase in household credit growth, and total spending of consumers. Household credit growth, which was primarily driven by student and auto debt for several years after following the Great Recession in 2007-09, is now growing due to an increase in credit card expenditures. Consumers are less inclined to leave their credit cards in their pockets, providing more support to consumption, which contributes to 70% of economic activity and GDP. Thursday, September 8th, it is expected that the Fed will report a jump in outstanding credit to $15 billion for July, despite credit gains slowing by $5.6 billion the previous month.
This Wednesday September 7th, the Labor Department will evaluate payroll growth in the month of July. Hovering near record levels behind generating 275,000 jobs in July, hiring has been lagging. This can be attributed to mismatches between job requirements and candidates’ skills, as well as a decrease in supply of labor due to increase in hiring the past months. Another contributor could be a decrease in layoffs rather than stronger hiring.Healthy service sector takes economic spotlight this week
As consumer confidence rises, and faith in credit begins to restore post mortgage crises. The potential for growth in consumption looks promising; With interest rates extremely low, consumers are feeling comfortable with taking on more credit.
http://www.usatoday.com/story/money/2016/09/05/healthy-service-sector-takes-economic-spotlight-week/89773000/
Article by:
Paul Davidson, USA TODAY 3:38 p.m. EDT September 5, 2016
It is interesting to note that the majority of household credit was in the form of student loans and auto debt for the years following the recession of 2007-2009. It is surprising that, with this increasing college tuition and student debt, people are now starting to increase their credit card expenditures while their debt has increased.
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