Wages for US workers have been going nowhere.
But that doesn’t mean that many US workers don’t have a little more cash in their pockets to spend.
We’re talking about the benefit of falling gas prices.
“Lower oil prices represent a large tax cut for consumers in the developed world, particularly in the United States,” BlackRock analysts write.
In a new report on the impact of falling oil prices, the analyst relate tumbling gas prices to stagnant wages.
“The average hourly US wage bought about 10 gallons of gasoline in January, up from 5.7 gallons in mid-2014,” the analysts write. “The response should be swift: any gasoline price decline that is part of an extreme fall (over 15% in a quarter) tends to generate a bump in consumption in the next quarter that is four times as large as the effect of milder price falls, we find.”
The early retail sales data does not reflect such a big boost. Indeed, the new University of Michigan consumer sentiment data shows that most Americans don’t expect low gas prices to be permanent.
We’ll have to keep an eye on the upcoming economic data to see what really happens.