UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'The great US consumer'
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Mar 6, 2026 Discussion of how the US labor market shapes consumer confidence and spending. Consumers dipping into savings to cover tariffs and higher prices. Why current wage dynamics differ from 1970s inflation scares. The role of oil and gasoline price jumps in shaping perceptions of inflation. A look ahead at retail and auto sales as clues to household behaviour.
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US Labour Market Is Economy's Central Pillar
- The US labour market is the key determinant of consumer confidence and medium-term growth risks.
- Paul Donovan argues the market isn't tight enough for wage-price spirals but is strong enough to keep employed people spending.
Tariffs Shift Spending Not Prices Themselves
- In 2025 US consumers spent more and saved less to absorb tariffs, so price levels—not tariff mechanics—drive behavior.
- Donovan notes average hourly earnings can rise without real wage gains when hiring shifts to cheaper younger workers.
Gasoline Spike Raises Perception Risks More Than Immediate Cuts
- Recent sharp oil and gasoline price moves will shape inflation perceptions and political complaints about living standards.
- Donovan expects short-term complaints but believes consumers will likely maintain consumption unless higher prices persist.