Pay is up, savings are up, debt is down, and economists are projecting a surprising Christmas (or Channukah) gift for retailers this holiday season: the return of the American consumer. The Fiscal Times makes a compelling case for a merry Christmas shopping season:
The National Retail Federation is projecting a 2.3 percent increase in November and December sales from a year ago, but many economists expect even bigger gains. "We're forecasting a 5 percent year-over-year increase in holiday sales," says economist Mark Vitner at Wells Fargo Securities. Wells Fargo's definition of holiday sales differs slightly from that of the NRF, but the tally is still more than twice the NRF's projection, and it would be the strongest showing since 2005.
Vitner and others make a strong argument for a solid retail season. Despite a still-high 9.6 percent unemployment rate and a disappointing 2.8 percent pace of GDP growth so far in the recovery, the economy has managed to create 1.1 million private-sector jobs. Through this point last year, payrolls had fallen by 4.7 million. More jobs mean that income from wages and salaries, a key driver of consumer spending, has picked up this year. Pay has grown at a 3.8 percent annual rate over the past six months, more than three times faster than in the same period last year.