Inflation Eases, Consumers Spend, Jobs Multiply

Keep the champagne on ice for now, but the people have spoken, and the message seems clear — we’ve gotten used to expensive gas, we’ve got jobs, and we’re in the holiday shopping spirit.

You don’t have to look far to see signs pointing to a robust fourth quarter.

Of the economic statistics, the one that I’ve been watching closely this year is unemployment. Currently at about 3.7%, the Fed’s unemployment rate is hovering right around its lowest point over the past half century. It’s back to where it was before the pandemic upended everything. Like it never happened?

Furthermore, only one in five of those unemployed have been so for six months or more. As economists will tell you, that’s about as close as we can get to full employment.

Inversely, for job hunters it’s a raging bull market. The Federal Reserve reported recently that there were more than 10 million job openings in September, but only about 6 million were filled. That gap is historically chasmic now, but it had been growing before Covid, suggesting the trend might be more than a pandemic anomaly.

For now, at least, it’s unlikely a recession is imminent when just about everybody is getting a paycheck. In addition, the fourth quarter began with a lot of momentum.

The tactic this year of running early holiday sales promotions to clear out the inventory glut and prime the season seems to have been working. Walmart recently reported a healthy third quarter rise in comparable US same-store sales of 8.2%. Home Depot said its quarterly sales rose 5.6%, citing Hurricane Ian and a shift to home-improvement projects by stay-in-place homeowners stymied by lofty mortgage rates.

The latest ecommerce statistics from Adobe Analytics were even better. Shoppers spent $72.2 billion online in October, up 11% from September. Adobe said consumers have spent 7% more so far this year than they did in the same period last year.

Finally, inflation is easing.

So, the news is mostly good. And as an armchair social scientist, the season may get a further boost now that the election cycle, and all the anxiety and distraction it generated, is behind us.

Compared to the past two seasons, this feels like a miracle.