9/23/2016
By Charles Payne, CEO & Principal Analyst

The stage is set as the Fed has told us to expect a surge in household wages any minute now. Cheap oil and a strong dollar, what I call backward prosperity, didn’t unleash animal spirits.  At some point, however, higher incomes would.   In 2015, wages climbed 5.2% to $56,516 from 2014.  That median household wage is still hovering below previous peaks:

• $57,423 in 2007
• $57,905 back in 1999

But, what few market watchers and economist talk about is the record high level of disposable income.  This is just one of the end results of the carnage of the Great Recession that saw many pay the bills they could, or otherwise, jettison bills they couldn’t afford.

It gets back to the notion that people need to see fatter paychecks, and even then, many folks are going to be hesitant to spend money based on what I call the Great Depression Syndrome.   Those folks that will react to improved wages will probably use a combination of cash and credit. 

Charge It…Maybe

While disposable income is higher, household cash is significantly lower, so the notion of rewarding ourselves with a trip to the mall means we can’t leave home without our credit cards. 

I must say, it might take a serious spurt in confidence to get folks to shift from debit cards and fiscal discipline to credit cards and increased debt.

One deciding factor could be the very low level of savings, which actually spiked in July, but is still in a long-term downtrend dating back to its 1970 peak.

The good news for consumers is that default rates are low, even though we are getting yellow flags in the pace of auto defaults. 

The bottom line is the consumer might be able to come to the rescue of the economy, but the bigger question is will the consumer come to the rescue.

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Charles Payne
Wall Street Strategies

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