…but that doesn’t mean that they’ll put that spending power to work!
Although betting against the US consumer’s proclivity to buy stuff has not been a great bet historically…
OK, enough dissembling. Here’s Lord Abbett’s Milton Ezrati making the case that households are in better shape than most give them credit for:
Households, still some 70% of the economy, have improved their finances impressively. In the last five-plus years, households have shed almost $1.0 trillion in mortgage debt. Household net worth has increased $3.8 trillion, or some 4.7% during the year ended this past June (the most recent period for which such data exist). The burden of debt service has dropped, from more than 18% of aftertax household income in 2007, as the economy approached the last cyclical peak, to barely more than 15% at the end of the second quarter. Meanwhile, business, rather than hire many new full-time employees, has increased overtime, so that the average work week in this country has expanded, from a low of just a little more than 33 hours in 2009 to a bit less than 35 hours most recently. The average factory work week now exceeds 40 hours, so that manufacturing workers receive almost 3.5 hours of overtime pay each week. This jump has done little to re-employ the many who still have not found work, but it has increased the disposable incomes of those who do have jobs. Despite the historically slow 1.5% annual rate of jobs growth, these influences have pushed up household incomes from wages and salaries close to 4.5% during the past 12 months. After adjusting for the lower burden of debt servicing, this measure of spendable income gains rises toward 5.0%. This is hardly enough to create a boom, but it points to an increase in confidence as well as spending ability. It serves as another powerful reason why a recession is highly unlikely.
Amazon can’t get every single dollar of this, can they?