It is very often said that low spending is the fundamental problem in our economy. This is wrong.
Note that income and spending fell less then 1.0 percent from Q3 to Q4. Labor hours fell twice as much.
So why is spending said to be the cause, and labor hours the effect?!
This looks to me like a problem with the labor market, which spills over a bit on income and spending.
This means two things:
- attempts to stimulate spending, even if they actually stimulate the spending, will have only an indirect effect on employment (given some of the bad incentives of the stimulus plans, the effect on employment may be in the wrong direction!).
- income and spending will head up before employment does. Income and spending may already be headed up!