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Jobs market momentum could spur consumer spending

Oct 01, 2013 Philip Burgess

Consumers are beginning to receive some good news in the form of momentum in the jobs market. Fewer Americans are filing for jobless benefits, which could push consumer spending levels higher in the coming months. As a result, short term lenders may see an influx of applications as well.

The week ending September 21 saw the number of Americans applying for first-time unemployment benefits unexpectedly decline by 5,000 claims to 305,000, according to the U.S. Department of Labor. Economists surveyed by Bloomberg called for an increase to 325,000 applications.

"Companies are running pretty lean at this point, so that's always a good catalyst for potential pickup in hiring down the road," Jacob Oubina, senior economist at RBC Capital Markets, told Bloomberg. "The overall trend even before we started having the technical issues was decidedly lower."

With fewer layoffs, businesses across the country are showing confidence in the U.S. economy, which could help fuel future consumer spending as Americans become more secure in their positions.

August proved to be a solid month for job growth
The most recent jobless claims report shows that the employment situation is continuing to build off the momentum that began with the strong jobs report from August.

Private sector employment increased by 176,000 positions in August, according to the ADP National Employment Report. Medium-businesses contributed the most with 74,000 new jobs, followed by small and large businesses, adding 71,000 and 32,000 positions, respectively.

The service-providing sector continued to dominate with 165,000 of the 176,000 jobs. Meanwhile, all five industries - construction, manufacturing, trade/transportation/utilities, financial activities, and professional/business services - posted job growth.

"It is steady as she goes in the job market. Job gains in August were consistent with increases experienced over the past two-plus years," said Mark Zandi, chief economist at Moody's Analytics. "There is little evidence that fiscal austerity and Health Care Reform have had a significant impact on the job market."

Demand for short term lending could rise with spending
Generally, when to jobs market begins to show strength, consumers are able to be comfortable with increased spending levels. However, this doesn't mean that they are immune to financial troubles. In fact, unexpected expenses can be more crippling when expenditures pick up.

For example, purchasing a new car when the economy is picking up steam may seem like a good idea at the time, but when the hot water heater bursts the following week, people may find that they are short on cash.

To help ease the financial pain from such a situation, short term lending can be utilized. If consumers are in jeopardy of failing to pay any essential bills, this form of lending could provide them with money fast to cover the cost of these expenses. The biggest benefit of a short term loan is that it allows people to avoid having to pay costly late fees and penalties, which are often much higher than what they will pay to secure lending.