Asia Unhedged has been consistent in our skepticism that US wage growth is on the verge of a dramatic acceleration, despite a common assumption that the low unemployment rate will eventually drive up pay.

There is persistent evidence that demographic changes can be credited with the lack of any real wage growth. These changes include the availability of workers willing to trade off lower pay for flexible hours (and the technology that makes that convenient), as well as risk-averse behavior due to any number of factors.

One of those factors, it has been conjectured, is a post-2008 financial crisis psychology among many in the workforce. Michael Goldfarb writes for The Financial Times on Monday that, despite the difficulty in breaking such a phenomenon down with statistics, this is a credible explanation, especially as consumers rack up credit card debt.

“There are no statistical breakdowns of how fear of unemployment spreads. But it is like fear of cancer. Most people will not get the disease but know someone who has died of it, therefore they fear it. Similarly, most people who work for a wage know someone who has been laid off. They will have seen what happens to individuals who are laid off. They will have watched marriages come under intolerable pressure, had farewell parties for neighbours forced to move to find work. They will know it takes a long time to find a new job — currently 23 weeks in the US.

Credit cards, Goldfarb adds, are acting as a replacement for what pay raises did in the past.

“These days, credit cards substitute for what pay rises used to provide: the means to buy stuff. It is a perverse kind of “virtuous” circle between employers and the financial companies behind credit cards. And the debt keeps working people docile. We no longer owe our souls to the company store; we owe them to Visa and Mastercard.”

These trends are all evidence of the risks posed by the US consumer. Real hourly earnings growth is negative YOY, as we reported last month. The correlation between credit-card growth and retail sales is at an 8-year high.

6-month-rolling-correlation

The possible explanations for slow wage growth don’t give any indication that low unemployment will all of a sudden lead to breakout wage growth, given that it has shown no signs of doing so as of yet. On the contrary, it is more likely that the fragile position of the US consumer will weigh on retail sales, posing a risk to the global economy.