Monday, January 30, 2012

Wages go up, Spending Stays Down

It appears as though consumers are still a bit tentative when it comes to spending in this economic climate. According to the Wall Street Journal spending was a bit down from it's usual December figures despite wages rising. This goes against basic economic principles as usually an iincrease in wages will lead to consumers purchasing more products or more expenisive products. It also goes against tradition as December usually sees increased spending due to the holidays. The economic oddity is likely due to a lack of consumer confidence. However as the Wall Street Journal stated, this is a double edge sword because while consumers may need to spend less due to their low savings; economic growth won't occur until there's more spending. I believe that as people wages rise, they should spend more in accordance with how much more money they're earning. Thus they would be obeying basic economic laws while also contributing to economic growth.