Today, we go back even further up the causation ladder, to look at the question "How can we anticipate when Consumer Spending is about to slow?"
It turns out there’s a reliable tell that gives lots of warning prior to a Consumer Spending slowdown: Real hourly earnings.
Real hourly earnings downtrends of a year or longer have been a generally reliable leading indicator of consumer-spending downtrends. Real hourly earnings gave particularly notable advance warning of the 2000–2002 economic downturn.
Real hourly earnings are reported on a pretax basis. Therefore, in the mid-1980s and 2003-early 2004, strong gains in consumer spending despite slowing real earnings were an anomaly reflecting federal tax cuts in those periods.