The US Bureau of Labor Statistics reported today that total nonfarm employment remained steady in October, with 12,000 jobs added, and the unemployment rate maintaining its level at 4.1%. The health and government sectors saw a continuation of the upward trend in employment, while temporary assistance services were affected by the loss of some jobs. The manufacturing sector also witnessed a decline as a result of strike activity.
This statement is based on data from two monthly surveys. The Households Survey measures the state of the labor force, including unemployment, according to demographic characteristics, while the Enterprise Survey measures non-farm employment, hours worked and earnings by industry. For more information on the concepts and methodology used, see the Technical Note.
The unemployment rate remained at 4.1 percent in October, with the number of unemployed largely unchanged, at 7.0 million, higher than the previous year when the rate was 3.8 percent and the number of unemployed 6.4 million.
Unemployment rates among key groups remained unchanged significantly, with unemployment rates for adult men at 3.9%, adult women at 3.6%, and adolescents at 13.8%, while they were 3.8% for whites, 5.7% for blacks, 3.9% for Asians, and 5.1% for Spaniards.
The number of people permanently losing their jobs rose to 1.8 million in October, while the number of people temporarily laid off changed slightly to 846,000. The number of long-term unemployed (27 weeks or more) also increased to 1.6 million, up from 1.3 million last year, accounting for 22.9 percent of the total unemployed.
labor force participation rate remained at 62.6%, and the employment-to-population ratio at 60.0%, with minor changes throughout the year. The 4.6 million people working part-time for economic reasons remained unchanged, preferring to work full-time but working part-time due to lack of hours or lack of full-time jobs.
The impact of the unemployment rate on consumer behavior and spending
The unemployment rate greatly affects consumer spending patterns, affecting economic activity in various ways. Here’s how it affects consumer behavior:
- Income levels
Stable employment: A low unemployment rate usually refers to hiring more people, leading to higher levels of overall income. When consumers feel secure in their jobs, they are more likely to spend money on goods and services.
Disposable income: Higher levels of employment increase disposable income, allowing consumers to spend more on discretionary items, such as dining out, travel, and luxury goods.
- Consumer confidence
Psychological effects: The low unemployment rate boosts consumer confidence, as individuals feel more secure about their financial situation and job prospects. This confidence encourages spending.
Recognizing economic health: When unemployment is low, consumers see the economy as strong, which can lead to an increased desire to make large purchases, such as homes and cars.
- Spending on necessities versus discretionary items
Necessities: In times of high unemployment, consumers often prioritize spending on basic goods (such as food and housing) and reduce discretionary spending.
Discretionary spending: The low unemployment rate encourages consumers to spend on non-essential items, leading to growth in sectors such as retail, travel and leisure.
- Use of debt and credit
Borrowing behavior: With a stable labor market, consumers are more likely to take on debt (such as mortgages and personal loans) to finance larger purchases
Credit confidence: A low unemployment rate is often associated with improved credit conditions, making it easier for consumers to access credit and loans.
- Impact on savings
Savings rates: When unemployment is low and incomes are stable, consumers may feel less need to save for emergencies, leading to lower savings rates and increased spending.
Emergency funds: Conversely, during periods of high unemployment, consumers may prioritize building emergency savings and limiting discretionary spending.
The role of consumer spending in promoting inclusive economic growth
Changes in consumer spending significantly affect overall economic growth. Here’s how these dynamics work:
- Consumer spending as a major component of GDP
GDP composition: Consumer spending typically accounts for a large portion of a country’s GDP – often around 70% in advanced economies. Therefore, changes in consumer spending directly affect GDP growth.
Economic Index: Increased consumer spending is often seen as a sign of economic health, contributing to higher GDP growth rates.
- Multiplier effect
Ripple effect: When consumers increase their spending, companies see higher sales, resulting in increased production and potentially higher operating levels. This, in turn, can lead to more consumer spending, creating a positive feedback loop.
Investing in business: Higher consumer demand encourages companies to invest in new projects, expand operations, and hire more employees, further spurring economic growth .
- Sectoral growth
Impact on different sectors: Consumer spending affects multiple sectors, including retail, services, manufacturing, and construction. Growth in these sectors can lead to job creation and increased economic activity.
Services dominance: In many economies, especially advanced ones, the services sector (which includes healthcare, education, and entertainment) is heavily influenced by patterns of consumer spending.
- Innovation and entrepreneurship
Stimulating innovation: Increased demand from consumers can spur companies to innovate and introduce new products or services, driving economic growth through technological advancements and improved productivity.
Startups and new ventures: Higher consumer spending can lead to the emergence of new startups, boosting economic dynamism and job creation. consumers may prioritize building emergency savings and limiting discretionary spending.
