The news that retail sales recorded its biggest gain since 2017 affirms our view that consumers will continue to support the economy. The normal analysis that focuses on average hourly earnings overlooks the fact that the basic consumer unit in America are households not individuals. Household income is rebounding at a faster rate than it is for individuals. The majority of households are families (defined as two or more persons related by blood or marriage). The recently released report on Employment Characteristics of Families is very positive:
- In 2018, 5.2 percent of all families included an unemployed person which is the lowest proportion since 1994, the first year for which comparable data are available.
- The number of families with at least one member employed full-time increased by 764,000, its largest gain since 2012.
As good as the results are so far, there is still considerable upside. The proportion of families with at least one unemployed member and some family members employed has yet to reach prior peaks. It is also a similar picture for families with at least one unemployed member and some family members employed full time. These two developments also signify that the labor market is not yet fully healed.