Why Consumers Are Pulling Back Before the Labor Market Does

The latest jobs data from the Bureau of Labor Statistics suggests the labor market is cooling gradually. PYMNTS Intelligence finds consumers are already behaving as though the slowdown has arrived.

Employers in the United States are continuing to add jobs while hiring remains stuck in neutral, the government data showed. At the same time, PYMNTS Intelligence research found that households are becoming less confident in their ability to recover financially from job loss, even while feeling relatively secure in their current employment.

Ahead of the long holiday weekend, the bureau reported Thursday (July 2) that employers added just 57,000 jobs in June, down from the revised gains recorded in April and May. Private-sector hiring slowed to 49,000, while the number of industries adding jobs continued to narrow, a sign that employment growth is becoming less broad-based even as the unemployment rate edged down to 4.2%.

Separately, the bureau reported Tuesday (June 30) that in May, employers continued advertising roughly 7.6 million open positions. Yet hiring remained stuck at 5.2 million, where it has hovered for much of the past year. Workers also showed little appetite for changing employers, with the quits rate holding at 1.9%, while layoffs remained historically low.

Companies are largely keeping the workers they have while slowing the pace of bringing in new ones. Workers, meanwhile, appear reluctant to leave positions they already hold.

Employment Stability Isn’t Translating Into Financial Confidence

PYMNTS Intelligence data more fully explained the disconnects in the labor market. The data book “Why Job Security No Longer Shields Paycheck-to-Paycheck Consumers” showed that U.S. consumers continue to express relatively strong confidence in keeping their current jobs, but there has been some weakening in the confidence in what would happen if those jobs disappeared.

Someone who believes another job is readily available is more likely to finance a purchase, upgrade a vehicle, travel or make discretionary purchases. Someone who believes replacing lost income could take months behaves differently, even while fully employed.

PYMNTS Intelligence also found that financially secure consumers scored 71.3 on the Financial Resilience Index, compared with 37.8 among households struggling to pay bills. Emergency preparedness was even more uneven, with financially stressed households scoring just 24.5, versus 85.4 for consumers not living paycheck to paycheck. As a result, households are becoming defensive despite an unemployment rate that remains historically moderate.

For merchants, that may translate into shoppers comparing prices more aggressively, delaying discretionary purchases and responding more readily to promotions and loyalty offers.

Headline indicators still point to a relatively healthy employment picture. PYMNTS Intelligence suggested households are looking beyond those headlines. Consumers believe the biggest financial risk is not losing the job they have today, but replacing that income tomorrow.