Americans Spending More as Optimism and Economy Improves

The unemployment problem plaguing the US may be affecting full recovery of the economy, but consumers are definitely more optimistic now as seen by the increased levels of spending in recent times. February’s statistics show that consumer spending steadily increased for the fifth month in a row, which is good news for policy makers, businesses, and the general public.

However, the income levels of most Americans have not perked up to match the spending spike. The distressing unemployment levels are keeping employers cautious for now, with not many offering higher pay scales or hikes as yet.

Although the signs of recovery are evident in all sectors of the economy except the housing market, the massive setbacks caused by the recent recession are not likely to be forgotten anytime soon. People appear to have learned a valuable lesson from the recent downturn – that of treading with caution even in face of apparent prosperity.

The growing optimism and evident improvement in industrial activity have helped boost confidence in the strength of the US economic recovery. This has led people to increase spending in spite of unchanging earnings. It means that consumers are drawing on savings to fund their spending. A 0.3 % spike was seen in spending levels in February as compared with the previous month, according to a Commerce Department report. The savings rate fell from over 4% last year to 3.1% in February. But economists point out that these levels are still representative of the cautious approach that most people are sticking to.

Many economists assure that better times are ahead at least as far as the improving confidence of consumers is concerned. While the 9.7% unemployment rate will dampen matters somewhat, spending is still expected to rise. Experts are predicting that the government will be following the increased spending pattern with interest in the coming months to look for signs of inflation. However, they say that the Federal Reserve is still likely to hold back any interest rate hikes until the employment rates pick up too. This will give the economy a firm footing as normalcy is resumed.

Although the employment picture is not clear enough as yet, there is expectation that March will show some new job creation. The unemployment level has somewhat stabilized and is no longer rocketing upwards. According to experts, it is just a matter of time before hiring kicks in.

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