Strengthening employment outlook could boost consumer borrowing
Aug 20, 2013 Quinn Thomas
Both spending and borrowing often increase when consumers begin to see improved conditions. One of the driving factors behind Americans feeling more confident is the employment situation, which is getting better by the month. As a result, short term lending demand may rise in the near future.
Initial jobless claims hit six-year low in early August
The week ending August 10 saw the number of applications for first-time unemployment benefits drop by 15,000 to 320,000, according to the U.S. Department of Labor. This brought the number of claims to the lowest level since 2007 - a sign that the jobs market is on the mend.
Should the slowdown in firings lead to a pick up in hiring, household incomes could increase, which might lead to additional spending and borrowing activity.
"The labor market is improving," Brian Jones, senior U.S. economist at Societe Generale, told Bloomberg. "We've got decent momentum on consumer spending heading into the third quarter."
National employment increases in July
Another sign of the improving labor market came in the form of 200,000 new jobs in the private sector during July, according to the ADP National Employment Report. This gain was up from the previous month when 198,000 new positions were created.
Small businesses continued to lead the way, adding 82,000 jobs, followed by medium and large businesses at 60,000 and 57,000 positions, respectively. The only industry that had a negative month was manufacturing.
"Job growth remains remarkably stable," said Mark Zandi, chief economist of Moody's Analytics. "Businesses are adding to payrolls in most industries and across all company sizes. The job market has admirably weathered the fiscal headwinds, tax increases and government spending cuts. This bodes well for the next year when those headwinds are set to fade."
Improving employment situation could boost borrowing activity
Should the jobs market continue to pick up steam, consumers may feel more confident in their personal financial situations, which can potentially lead to increased borrowing activity.
Spending more money can certainly help fuel the economy, but it can also put consumers at risk should they face an unexpected expense. Fortunately, there are places Americans can turn to when they find themselves falling short of essential expenses, such as short term lenders. Consumers struggling could find a short term loan to be a good, one-time option to cover bills while they regain their financial footing.