Workers are concerned about rising unemployment levels and further job losses, as evidenced by a decline in discretionary spending — for electronics, restaurants and travel, according to a March 20 report from Bank of America.
“The labor market is supporting spending for now, but cracks have emerged in sentiment and expectations,” according to the report.
Based on bank payment data, people are spending more on their major expenses, such as housing, insurance, car payments and utilities, while buying value or discounted groceries and benefiting from lower gas prices. Discretionary spending has declined across all income groups, but especially among consumers in lower-income groups.
On average, households across all income levels have experienced an increase in post-tax wages and salaries year over year, according to Bank of America internal data. Deposits are declining this year but at a slower rate than last year, the report found, indicating that consumers may have tapped into their savings to cover nondiscretionary costs last year.
At the same time, lower-income households have seen wages increase more slowly during the past two years, according to Bank of America data. The unemployment rate has also increased during the same time period, and recent survey data indicate workers expect unemployment to grow worse in the next year.
“So, in our view, while the labor market remains solid, it’s possible that consumers’ negative expectations may weigh on their spending decisions, especially when it comes to lower-income households and their more discretionary choices,” the report said.
Hiring reached its lowest point in five years in December, both in the U.S. and globally, according to a BambooHR report. Hiring, job openings and turnover decreased across all industries at that time.
The labor market could remain “frozen in place” amid business and political uncertainty, lead economists said. New policies, proposals and reversals from the Trump administration will continue to shape job numbers and market momentum, they noted.
As the labor market shifts, HR is evolving as a strategic leader, according to an isolved report. More than 9 in 10 HR leaders say their team is considered a key business driver, though they expect hiring concerns, skills gaps and talent shortages to persist in 2025.
