Payrolls Climb More Than Forecast, U.S. Jobless Rate at 5.5%

WallStreetVixen said:

That's nice, but none of which had to do with any household sector delivering or an increase in aggregate demand.

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Several points:

1. Household deleveraging has an impact on consumer spending.
2. Consumption expenditures is one of the determinants of aggregate demand.
3. An increase in consumption leads the aggregate demand curve to shift to the right (increase).

The proposition that personal consumption expenditures have no impact on aggregate demand is incorrect, to say the least.

In addition, unless one has not been following the Fed, among other sources of economic and financial information, household deleveraging was prominently cited for the slow growth in employment following the end of the recession. For example, Atlanta Fed President Dennis Lockhart observed:

In my view, there are three likely protracted and interconnected adjustment processes of significance. They are 1) deleveraging (that is, the reduction of total debt levels in our economy), 2) fiscal adjustment, and 3) financial system repair. In addition, the accumulating pressure of an aging population will affect labor force participation and output potential.

As noted previously, the JOLTS survey revealed 3.914 million job openings in December 2013 and 5.028 million openings in December 2014. That a 28% jump occurred in the year following the end of household deleveraging is anything but a coincidence or random event. Instead, a major headwind that had been holding back the economy had abated, real PCE began growing more briskly, and a sustained increase in aggregate demand increased the demand for labor in numerous sectors of the economy.

WallStreetVixen said:

That's nice, but none of which had to do with any household sector delivering or an increase in aggregate demand.

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To add and complete my point. There is no economy in which household consumption/saving simply vaporizes into some realm other than the economy and has no impact on the aggregate demand curve. It's basic macroeconomics that consumption/saving impacts the aggregate demand curve. When consumption grows, the aggregate demand curve shifts to the right (increases). Conversely, when it shrinks (or saving increases), it shifts to the left (decreases). When a share of consumer income was devoted to debt reduction (deleveraging) by the household sector, that share was, in large part, foregone consumption given that the largest share of household income typically goes to consumption.

I now understand the confusion as to whether there was an increase aggregate demand when household deleveraging ended (there was) and whether that impact increased the demand for labor (it did). Familiarity with macroeconomic fundamentals would do more to resolve that confusion than what is clearly evolving into a proverbial dialogue of the deaf.