Hints of Recovery? J.P. Morgan Tells Firms to Prepare for Consumer Spending Revival

Unemployment remains stubbornly high. The housing crisis has chipped away at consumer confidence. Commodities costs have pushed prices for everyday items upward. Yet there are signs the economic picture might be getting better for some Americans -- which means businesses could start working harder to get us to start spending again.

At least, that's what companies should be doing, according to a new J.P. Morgan (JPM) report, Light At the End of The Tunnel: Getting Ready for the Return of the U.S. Consumer.

U.S. consumer balance sheets have recovered to levels not seen in several years, the report says. "This trend could lay the foundation for a recovery in consumer sentiment." Yet despite these signs of improvements, "many firms are not investing in ways that would take advantage of a potential consumer recovery" to get a bigger share of the $10 trillion U.S. consumer market, the report says.

Indeed, "the U.S. consumers' health is not as bad as many assume."

J.P. Morgan cites glimmers of hope in the labor market and consumer debt levels that have the potential to "re-energize the consumer."

For one, job openings increased 23% in September, "a post recession high," the report says.

Meanwhile, total consumer debt has dropped by $800 billion from its peak levels in 2008. In turn, the ability of households to pay down debt is greater today that it was at the outset of the financial crisis, according to the report.

And household savings have increase by 23% since the end of 2006.

Looking ahead, rents are on the rise, which makes home ownership more appealing to consumers, the report says.

"When home prices increase, household wealth increases and consumers feel more comfortable making purchases."

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