While the economy added a better-than-expected 311,000 jobs in February, credit- and debit-card data from Bank of America shows people kept on spending at a strong clip during the month.
Consumers’ willingness to spend is closely tied to their employment situation, and a person who’s out of work or worried about their job prospects are obviously more likely to cut back on their spending.
So what’s going on?
The February jobs report on Friday comes after a major 504,000 addition to payrolls in January, revised back from 517,000 jobs. And that’s even with the steady drumbeat of more tech sector layoffs. Some observers wonder how much longer the labor market can keep it up. But if consumer spending habits offer any clue, data from the Bank of America Institute might suggest there’s still room to go.
Compared to a year ago, consumer credit- and debit-card spending in February increased 2.7% year over year. That’s down from January’s 5.1% year-over-year growth in spending, but the Bank of America Institute researchers said the numbers suggest consumer pending is still holding up.
There is strain, like signs that lower-income households have been relying more on their savings, researchers said. Still, “the strength of the labor market has allowed U.S. consumers to largely ride through inflationary pressures.”
“Strong labor markets” are boosting consumer spending and any impact from tech-sector job cuts is “modest,” researchers wrote in a Thursday report.
Read also: Retail sales surge 3% at start of 2023 in clear sign the economy is still growing
The backdrop is the very visible layoffs in a list of companies that includes Twilio
Zoom Video Communications
Google parent Alphabet Inc
In a running tally of announced job cuts, over 122,000 global technology-sector workers have been laid off since the start of the year, according to information from the website Layoffs.fyi.
On Friday, the Bureau of Labor Statistics’s jobs report noted 25,000 lost jobs in the “information industry” and a decrease of 54,000 jobs in the industry since November.
The types of industries that fall under this category include newspaper publishers, software publishers, radio broadcasting, media streaming, social-media networks and web-search portals, according to a Bureau of Labor Statistics spokesman.
Now set that against the Bank of America Institute
data, where researchers looked at the bank’s data in six tech-sector hot spots: San Francisco and Los Angeles in California, Austin, Texas, Washington D.C., Boston, Mass. and New York City.
In these locations, the overall card spending from households might have decreased 1% since September — “perhaps as a result of tech layoffs.”
Researchers looked closer at information from households making at least $125,000 a year, because tech-sector workers may tend to earn more, they said. There was a time in mid-2022 when these accounts were spending at a slightly greater rate than accounts below that level.
But the spending increases for these higher-end accounts are now in line with the spending increases for accounts below $125,000 in these major hubs. And the same pattern is happening across the country, researchers said.
“So we think there is no additional impact from the tech-layoff announcements on higher-income consumers currently,” the researchers wrote.
It’s entirely possible that laid-off tech-sector workers are quickly finding work by taking their talents to new industries. But nor does that mean that losing a job and landing a new one is an easy or low stress process.
“One of the benefits of the tight labor market is that not only is unemployment low, but workers aren’t spending a particularly long time out of work,” said Nick Bunker, director of economic research for North America at Indeed Hiring Lab, an economic research wing of the job search site Indeed.
The median length of unemployment fell to 8.3 weeks, and that’s below the 2019 average of just over 9 weeks. “We’ll need to wait for more detailed micro-data to know how long tech workers stay unemployed, but it’s likely lower than the overall average,” Bunker said.
The job market is “a source of strength” and “a strong foundation for the U.S. economy. Hopefully it can weather future storms,” he added.