BUSINESS
01/31/2011 01:28 pm ET Updated Dec 06, 2017

Consumer Spending Up In December, But When Will Hiring Improve?

U.S. consumer spending rose in December for the sixth straight month -- a sign of an improving economy, but still short of the rate of growth needed for to significantly transform the economy.

Personal incomes rose 0.4 percent in December while nominal spending -- which doesn't account for inflation -- was up 0.7 percent. Real spending rose by only 0.4 percent, government data showed on Monday.

"The numbers were okay," said Cary Leahey, senior economist at Decision Economics. "They showed an okay economy with the potential to do better. The real question is when will firms stop sitting on their kitty of cash and actually hire people. Right now things are sluggish and hiring is expensive. Companies don't feel a big desire to hire and it's a problem."

Leahey thought December's 0.7 percent growth in nominal spending was strong, but unlikely to be repeated in following months.

"The spending was quite strong," Bank of America economist Michelle Meyer told Reuters. "To me, the question is what is spending is going do in the beginning of the year. It is probably going to slow down. The year-end increase was not off fundamentals because the jobs market while improving is not great; retailers were offering a lot of discounts and credit conditions are still relatively tight."

These numbers follow last week's Commerce Department report which showed the GDP growing at a 3.2 percent annual in the last three months of 2010. The growth was certainly welcome, but, as with consumer spending, not nearly strong enough to fix the jobs crisis.

"The headline number -- the 3.2 percent growth -- if we sustain that rate of growth throughout 2011 that would do very little to push down the unemployment rate," economist Josh Biven said last week, noting that the GDP would need to be growing at a rate of at least 5 percent, month-over-month, for an entire year, for the unemployment rate to be lowered by one percentage point.