Friday’s robust jobs report showed an impressive 353,000 payroll gains last month, raising the question of why more Americans aren’t feeling the strength of the economy and labor market. To be fair, people are feeling better than they have been in the past couple of years. Consumer sentiment in January surged to the highest level since July 2021 due to easing inflation and rising incomes, according to a University of Michigan index. However, the gauge is still well below its pre-pandemic level and slightly below its long-run average.
It’s important to note that the January job gain wasn’t a one-time occurrence. Job growth in November and December was revised up by a total of 126,000, meaning an average of 289,000 jobs a month have been added since November. The average 255,000 monthly increase last year is down from 399,000 in 2022 but still robust.
One explanation for why Americans may not be feeling as positive is inflation. Despite enjoying headlines about vigorous hiring, consumers dislike inflation. Monthly job tallies can seem abstract, but people feel the effects of high prices in their wallets. It’s true that wage growth has outpaced inflation since last year, leading to rising inflation-adjusted pay. However, shoppers see gasoline and supermarket prices every day, while price increases have slowed, most prices aren’t coming down, which affects how Americans think about their financial situation.
Boosting consumer confidence is a record stock market, the prospect of Fed rate cuts this year, and relatively low gasoline prices. The outlook of higher-income Americans who are heavily invested in the market through stocks or mutual funds has significantly improved. However, a larger number of lower-income households are still burdened by record credit card debt and delinquencies. Additionally, interest rates are still high and pandemic-related savings are dwindling.
Despite the addition of 353,000 jobs last month, job growth overall has cooled over the past year. There are fewer job openings, making it more challenging to find a position. The number of job hunters has also increased. Furthermore, the industry actually shed jobs in January, despite a seasonally adjusted gain of 45,000 jobs in retail. Most workers’ outlook is affected more by news about layoffs than job gains. Recent announcements of thousands of layoffs by companies such as UPS, Google, Amazon, and Microsoft have also contributed to a lack of stability in the job market.
