Weekly Updates
Weekly Updates
- Advanced economies are in a weird position. Real wage growth is very negative, but consumer spending is holding up. The magic ingredient is that people are saving less each month. Reduced savings allow more spending. Critically, the willingness to reduce savings rates requires some degree of job security. Until recently, people have been feeling confident that their jobs are safe.
- Confidence is hard to measure. Political polarization makes surveys unreliable. It is with good reason economists focus on what people do, not what they say. However, if job security cracks, the resulting change in behavior risks slowing consumer spending more dramatically, slowing overall economic growth.
- Real economic data does not suggest employees should fear for job security. Unemployment rates are low across developed economies. But the economic stories are changing. Google searches for “recession” are at all-time highs. This is the first global growth slowdown of the Twitter era. As during the pandemic, social media excels at spreading fear. Exaggerating job security fears could become economically destructive.
- Tightening central bank policies may build fear over job security, which social media then exaggerates. This could increase the potency of central bank policy in the economy. Central bank policy may need to be more cautious because of the stories we tell.
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