Cautious consumers aren't helping the US recovery

Household spending used to be a reliable source of growth, but with consumers remaining cautious post-GFC the US needs to look to business, public spending and exports for support.

In the US, firms are hiring at their fastest pace in more than eight years but spending hasn’t followed suit. A range of cyclical and structural factors can account for this and -- although while some of them are only temporary -- they suggest that US household spending will not be the source of growth that it once was.

The relationship between jobs and spending is usually fairly straightforward. Higher employment equals higher incomes (whether in aggregate or via higher wages) and that results in greater household spending.

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