Consumer Spending Rises as Labor Market Remains Subdued

U.S. consumer spending increased solidly in October and November, supporting continued economic growth even as labor market conditions showed limited momentum, according to newly released federal data.

The Commerce Department’s Bureau of Economic Analysis reported that consumer spending rose 0.5% in November, matching the gain recorded in October. The combined data for the two months was delayed by a 43-day government shutdown. The sustained increase in household spending kept the economy on track for a third consecutive quarter of strong growth.

Economic Growth Continues at a Strong Pace

The BEA also reported that third-quarter gross domestic product growth was revised upward to a 4.4% annualized rate, the fastest pace in two years. That revision followed an earlier estimate of 4.3% growth for the July through September period. The economy expanded at a 3.8% rate in the second quarter.

Meanwhile, the Federal Reserve Bank of Atlanta is forecasting GDP growth of 5.4% for the October through December quarter. That projection reflects expected contributions from business investment and a smaller trade deficit.

Financial markets responded positively to the data. Stocks traded higher on Wall Street, the dollar declined against a basket of currencies, and U.S. Treasury yields were mixed.

Spending Gains Driven by Services and Goods

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, remained supported by increased outlays across several sectors. In November, spending rose in healthcare, financial services and insurance, as well as housing and utilities. Consumers also spent more on hotel and motel stays and restaurant and bar purchases.

Services spending increased 0.4% in November after advancing 0.6% in October. Spending on goods jumped 0.7%, following a 0.3% increase the prior month. Gains occurred in categories including motor vehicles, clothing and footwear, furniture, durable household equipment, and recreational goods and vehicles.

Spending on gasoline and other energy goods also rose, reflecting higher prices. After adjusting for inflation, consumer spending increased 0.3% in November, matching October’s gain and supporting stronger growth entering the fourth quarter.

Labor Market Shows Limited Movement

Despite solid economic growth, the labor market remained in what economists described as a low-hiring, low-firing environment. A separate Labor Department report showed initial claims for state unemployment benefits increased by 1,000 to a seasonally adjusted 200,000 for the week ended Jan. 17.

Recent claims data have been affected by challenges related to seasonal adjustments around the year-end holidays. The reporting period also overlapped with the survey window for January’s nonfarm payrolls report.

The four-week moving average of initial claims increased modestly between the December and January survey weeks. Nonfarm payrolls rose by 50,000 jobs in December, roughly in line with the monthly average for 2025.

Continuing claims, which track the number of people receiving unemployment benefits after an initial week of aid, declined by 26,000 to 1.849 million for the week ended Jan. 10. Economists noted that the decline likely reflected seasonal adjustment issues and the expiration of benefit eligibility, which is capped at 26 weeks in most states.

Income Growth and Falling Saving Rate

Personal income increased 0.3% in November after rising 0.1% in October. Government wages and salaries declined by $13.0 billion, reflecting the departure of public employees who accepted deferred resignation offers in September.

Wages rose 0.4% in November following a 0.3% gain in October. However, consumers continued to draw on savings to support spending. The saving rate fell to 3.5% in November, a three-year low, down from 3.7% in October.

Inflation Data Affected by Shutdown Distortions

Inflation readings for October and November reflected data disruptions caused by the government shutdown. The shutdown limited the collection of information needed to compile the Consumer Price Index and import price reports for both months.

To calculate components of the Personal Consumption Expenditures price indexes, the BEA used an average of September and November data. The PCE price index increased 0.2% in November, matching October’s gain. Over the past 12 months, the index rose 2.8% after increasing 2.7% in October.

Excluding food and energy, the core PCE price index also rose 0.2% in November. Core inflation increased 2.8% year over year, compared with 2.7% in October.

December CPI data suggested core PCE inflation may have accelerated, with some estimates reaching a 0.4% monthly increase. The BEA is scheduled to release December PCE inflation data on Feb. 20.