Spending Up in June; Job Cuts Decline In July
Sales incentives for new cars proved irresistible to many consumers, as spending in June increased by 0.8 percent, according to the U.S. Department of Commerce.
Inflation-adjusted spending on durable goods, defined as products expected to last three or more years, shot up 3.3 percent in June. The Commerce Department said income also rose 0.5 percent that month.
The consumer spending increase was a rebound from May, when spending declined slightly. The jump was attributed in part to Ford's sales promotion that extended employee discounts to everyone, Reuters reported.
"The employee discount programs have been a huge success," said Stephen Stanley, chief economist at RBS Greenwich Capital. "It appears that unit auto sales for July will exceed the 20 million (annual rate) mark for only the third time in history."
In addition, the Commerce Department reported that factory orders increased by 1 percent in June. That is the fourth consecutive increase, leading observers to say the economy is gaining momentum.
Pierre Ellis, senior economist at Decision Economics in New York, told Reuters: "The June gains in personal spending and income point to a pretty firm close to the second quarter, which puts the economy in a good position at the start of the third quarter. The underlying trend of growth is fairly solid.”
Even with the increase in car sales in June, automakers cut more jobs than any other industry, with 72,598 job cuts expected through July.
Outplacement firm Challenger, Gray & Christmas Inc. said in a report that planned layoffs in the U.S. fell 7 percent in July from June. Employers announced 102,971 job cuts in July, which is up 48 percent from one year prior.
That huge jump concerns one expert. “If job cuts in the auto industry continue and we start to see consistently high job-cut numbers from the top three job cutters in July, it should set off some relatively loud alarm bells about the state of the job market and economy,” said John Challenger, the firm's chief executive officer, in a statement.