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Investing Specialists

Consumers Make More, Save More, Potentially Fueling Growth

After some truly horrific personal income data last summer, the consumer is finally beginning to see meaningful increases in income.

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The S&P 500 jumped another 2% this week, mainly on Wednesday and Friday when reports showed job markets that were much stronger than anticipated. The auto industry has also been bursting at the seams, with both the manufacturing and services purchasing managers' reports stronger than anticipated. The construction industry also showed signs of life, producing a positive year-over-year growth rate for the third month in a row, and the strongest single-month growth rate since the crash of 2008. Even inflation-adjusted consumer incomes made a big move up after months of lethargy. Better purchasing manager numbers out of Europe this week seem to suggest that maybe--just maybe--the U.S. and developing economies may help pull Europe out of the ditch, and not vice versa. The only two flies in the ointment were continued declines in home prices, according Case-Shiller, and consumers who appeared downright stingy in December, despite rising incomes.

Headline Job Growth Exceeds Expectations
I don't like to look at either monthly job rate gains or the unemployment rate, but I'll admit that both these numbers looked strong, and outstripped my expectations as well as the Street's. Total employment grew 243,000, one of the better performances of this recovery, which is now acting a bit more like a normal one. Private-sector jobs grew an even more impressive 257,000, while government losses shrunk to 14,000.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.