Bump in Jobless Claims Underscores Consumer Caution Around Spending

Although jobless claims newly reported for the past week were only slightly higher, the psychological effect may be one where consumers are more cautious about spending.

The U.S. Department of Labor said in a Thursday (Sept. 12) press release that the number of Americans who filed new applications for unemployment benefits grew by 2,000 to 230,000 — and the latter number came in lockstep with consensus.

The numbers were off recent highs seen through the summer, where the peak had been 250,000 claims. But the trend is relatively stable, which means that (slightly increasing) layoffs are still a part of the job market tapestry.

U.S. firms created 142,000 nonfarm jobs last month, which was lower than the roughly 161,000 positions that were expected as a consensus. The July data was revised downward too, as the latest 89,000 tally was a drop from the 114,000 roles previously estimated.

A slight uptick in jobless claims, coupled with a slowing pace of job creation points to pressures for consumers mulling their employment prospects. Jobless claims grew for the first time in three weeks, Bloomberg reported Thursday.

If workers are eyeing their employment status with some level of caution, it makes sense that they would be cautious about their financial positions, and by extension, their spending.

Coming into 2024, PYMNTS Intelligence data took note of the pressures on household finances, particularly in the paycheck-to-paycheck economy.

The “Savings Deep Dive Edition” of PYMNTS Intelligence’s “Paycheck-to-Paycheck Report” found that a job loss — or reduction in income — is a reason consumers deplete savings, with 1 in 5 consumers identifying it as a contributing factor. Among the trends within employment, particularly as inflation remains a force to reckon with (although the pace has been cooling), the report revealed that 41% of consumers picked up gig work.

Will Caution Rein in Spending?

There are indications that caution will continue to be a key factor governing consumer spending. The PYMNTS Intelligence report “Higher Perception of Inflation Drives Paycheck-to-Paycheck Consumers to Trade Down” found that most consumers said prices for food and necessities have increased in the last year. They were most likely to note the rising cost of fresh meat and produce. Prepackaged products were close behind, with 78% of consumers noting a rise in cost. This was followed by prepared foods and household goods, at 77% each. Nearly three-quarters of consumers said restaurant prices were on the rise.

Seventy-four percent of consumers have cut back on nonessential retail purchases.

For those employed, and as estimated in the PYMNTS Intelligence report “Higher Perception of Inflation Drives Paycheck-to-Paycheck Consumers to Trade Down,” inflation has been cooling, but 70% of consumers said their income has not kept up with the pace of that inflation.