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Americans Are Still Spending, but Hiring Is Slowing, and Pressure Is Building

Spending is holding steady, but slowing hiring and rising energy costs could start to pressure household budgets and change consumer behavior.

What Happened?

U.S. consumer spending remained steady in February, even as cracks began to show in the labor market. Retail sales rose 0.6%, with core spending also posting gains, supported by wage growth that has continued to outpace inflation. That has allowed households to keep spending at a steady pace, even as other economic signals become more mixed.

Although spending has held firm, hiring activity is slowing. Job openings fell by 358,000, and the hiring rate dropped to 3.1%, the lowest level since 2020 and the lowest outside of the pandemic period in more than 15 years. That points to a labor market that is no longer expanding at the same pace, even if layoffs remain relatively low for now.

The context of these figures is notable, as these figures reflect conditions before the latest geopolitical tensions tied to Iran began to affect energy markets. That means the current strength in spending is based on a more stable cost environment than what may come next.

Why It Matters

Consumer spending has been doing much of the work of keeping the economy moving. As long as incomes are steady and people feel secure in their jobs, spending tends to hold up, as the latest data shows. Wages are still supporting demand, and layoffs have not picked up significantly.

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But the labor data points in a different direction. A lower hiring rate means fewer people are being hired, and fewer openings suggest companies are becoming more selective. While that does not immediately reduce spending, it can certainly change how households think about future income. Over time, that tends to manifest as more cautious behavior.

There is also a cost side that has not yet fully appeared in the data. Rising energy prices linked to tensions involving Iran could put added strain on household budgets. Higher fuel and transportation costs tend to ripple quickly through the economy, affecting everything from commuting to the price of goods. While it creates the appearance of stable spending now, current conditions will come under heavy pressure in the coming months.

How It Affects You

For now, things feel steady. Paychecks are still coming in, and spending hasn’t changed much day to day. But slower hiring makes it harder to find new opportunities or move between jobs, which can start to affect how secure people feel about their income.

Rising energy prices tend to hit households hard and quickly. Higher costs for gas, shipping, and transportation feed into everyday expenses, leaving less room in budgets for anything beyond essentials.

The adjustment usually happens gradually, as people start pulling back on nonessential purchases, putting off bigger expenses, or trading down to cheaper options. Over time, those choices add up and can change how businesses plan, hire, and price their products.

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