Wage Growth Sustaining the Consumer

Dr. Jeffrey Roach, Chief Economist at LPL Financial, discusses the impacts from solid wage growth, Fed rate cut expectations, and potential small business expansion.

Last Edited by: LPL Research

Last Updated: January 16, 2025

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Hi, I'm Jeffrey Roach, Chief Economist for LPL Financial, with three charts to highlight in this macro landscape. The first one is this: Fed is still on track to cut. So, after last week's robust jobs report, there were some arguing for the Fed to stand pat, and a few were saying the next action was a hike. Clearly, this is a reminder for investors to avoid knee jerk reactions. The latest inflation figures were heavily influenced by the temporary rise in energy prices, so markets interpreted the December CPI as a lot less worrisome. 10-year treasury yields dipped more than 10 basis points, lowering the likelihood that yields would reach 5% anytime soon. Second wage growth is sustaining the consumer. If there was just one relationship I would highlight, it would be this one here: Disposable income per capita. That's after taxes rose over 30% since the end of 2019.

This growth in income per capita gave consumers plenty of capacity to power through these inflationary times. It's incumbent on investors to monitor the income momentum throughout 2025. Third, more businesses plan to expand this year. One of the tailwinds we've highlighted recently is this potential shift in more business-friendly policies. So, here's an intriguing chart. Small businesses, often considered the backbone of our economy, recently reported this massive increase in expansion plans. Well, this move could provide upside support for an economy that is working through structural changes in so many ways. Well, that's all for now. If you want more insights on global market trends, follow us on social media and take care.

 

Dr. Jeffrey Roach, Chief Economist at LPL Financial, discusses the impacts from solid wage growth, Fed rate cut expectations, and potential small business expansion.

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