The U.S. Bureau of Labor Statistics reported today that total nonfarm employment increased by 254,000 in September, and that the unemployment rate changed slightly at 4.1 percent. Employment continued to rise in food services and drinking places, health care, government, social assistance and construction.
This press release provides statistics from two monthly surveys. The Household Survey measures the state of the labor force, including unemployment, by demographic characteristics. The Enterprise Survey measures
Non-farm employment, hours worked, and earnings by industry. For more information on the statistical concepts and methodology used in these surveys, see the change in both the unemployment rate, at 4.1 percent, and the number of unemployed, at 6.8.
million, a little in September. These measures are higher than the previous year, when the unemployment rate was 3.8 percent and the number of unemployed was 6.3 million. Among the main groups of workers, the unemployment rate among adult men (3.7%)
September. Unemployment rates among adult women (3.6%), adolescents (14.3%), whites (3.6%), blacks (5.7%), Asians (4.1%) and Hispanic (5.1%) showed little or no change during the month.
The number of unemployed for less than 5 weeks fell by 322,000 to 2.1 million in September. The number of long-term unemployed (those unemployed for 27 weeks or more) has not changed much during the
month at 1.6 million. That measure is higher than 1.3 million a year ago. In September, the long-term unemployed accounted for 23.7% of the total unemployed.
In September, the labor force participation rate stood at 62.7 percent for the third consecutive month, and the employment-to-population ratio changed little at 60.2 percent. Both measures did not change much throughout the year.
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:
1. 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.
2. 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.
3. 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.
4. 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, contributing to overall economic growth.
Credit confidence: A low unemployment rate is often associated with improved credit conditions, making it easier for consumers to access credit and loans.
5. 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.
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:
1. 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.
2. 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 .
3. 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.
4. 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. Emergency funds: Conversely, during periods of high unemployment, consumers may prioritize building emergency savings and limiting discretionary spending.
