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Strengthening jobs market could fuel consumer spending, borrowing

Sep 08, 2013 Philip Burgess

With the employment situation showing signs of strength in the past couple of months, Americans may begin to feel more secure in their jobs, potentially leading to a pick up in consumer spending. Generally, when people spend more money, borrowing activity follows suit, so short term lenders might want to prepare for a bump in business.

The employment situation showed more signs of momentum in August, as the private sector created 176,000 new jobs, according to the ADP National Employment Report. Medium-sized businesses generated the most positions at 74,000, followed by 71,000 at small businesses and 32,000 at large businesses.

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

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

President and CEO of ADP Carlos Rodriguez said the August job gains were in line with the monthly average in the past year, showing that momentum is strong in the jobs market.

Initial jobless claims show marked decline to end August
Another sign that the employment situation is picking up steam is the fact the first-time applications for unemployment benefits have been decreasing. The week ending August 31 saw a 9,000 drop to 323,000, according to the U.S. Department of Labor. The drop in claims brought levels down to pre-recession numbers.

Economists surveyed by Bloomberg called for a median increase to 330,000 claims, with estimates ranging from 325,000 to 345,000. Further improvement could occur in the future, as employers are beginning to cut back on firings and the negative impact of federal budget cuts and higher payroll taxes wear off.

"We are seeing significant improvement in claims," Yelena Shulyatyeva, economist at BNP Paribas, told Bloomberg. "What we need to see is more progress on the hiring side."

Should spending pick up, short term lending could prove beneficial
Just because Americans are able to spend more money, doesn't mean they will be able to avoid financial troubles. For example, anyone who overextends themselves and then runs into unexpected expenses may struggle to come up with the funds needed to cover monthly essentials.

Fortunately, short term lending is available to provide assistance during these times of need. Obtaining such a loan can enable consumers to keep up with their monthly bills while they regain their financial footing.

Critics say short term loans are costly for Americans because they come with extremely high interest rates. However, with a term of about one to two weeks, the interest charged is often much less than what would have been charged in late fees and penalties by missing a payment.