NEW YORK (TheStreet) -- For all the talk of consumer sentiment, retail sales and other measures of consumption, it is income and employment that drive economic growth. Personal consumption is simply the final transaction in the economic value chain. It is an effect of economic growth, not the cause.

In the absence of new jobs or higher real incomes, consumers cannot increase spending without drawing on savings or borrowing -- both unsustainable sources of consumption. The real driver of growth in jobs and wages is private-sector capital spending, also known as capital expenditures or capex.

Growth in capex appears robust -- up 9% per year -- if you look at it since the bottom of the financial crisis. But this masks the reality that compounded growth has been slightly more than 2% since the precrisis peak. That's anemic by long-term historical standards.

The hoarding of cash by corporations continues apace, with a new record set for balance sheet cash in 2014, while dividends and share repurchases are expected to deliver more than $1 trillion to investors this year. This is cash that is not being invested into growing businesses. Employment has recovered to slightly more than its precrisis peak, roughly in line with capital spending (see chart 1).

U.S. Capital Spending and Employment

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But prepeak jobs levels occurred seven and a half years ago. Capital spending and jobs have caught back up to precrisis levels, but the labor force under normal participation rates (accounting for the retirement of baby boomers) increased by 9.4 million during that time. An enormous amount of slack remains in the U.S. labor force. About 7.8 million jobs are needed to reach full employment (see chart below). But companies are on track for lower capital spending in 2015.

U.S. Employment and Normalized Labor Force History

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The close cause-and-effect relationship between capital spending and real wages broke down after the financial crisis (see chart below), owing to this labor force supply overhang. In other words, jobs growth from capital spending does not necessarily translate into real wage growth.

U.S. Capital Spending and Income

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It is labor scarcity that drives real wage growth, as observed in the chart below. Not until the U.S. economy reaches full employment, equating to an unemployment rate of approximately 5.3%, has real wage growth been observed historically. Recent levels of job creation imply full employment being reached in almost four years.

U.S. Unemployment Rate and Income

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Private-sector capital allocators have been demonstrating their skeptical outlook since 2000. From 1994 to 2000, capital spending grew 13% per year, but since then it has grown only 5% per year. Until companies begin to view investment in their own businesses as more attractive than engaging in mergers and acquisitions or returning cash to shareholders, jobs and wage growth will remain sluggish. There is little hope for U.S. gross domestic product expansion above the 2% to 2.5% range in this scenario, and global headwinds will only exacerbate the growth challenge.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.