A front page story in the New York Times today says that America may well be facing a serious recession, as evidenced by the fact that people aren’t spending as much money as they were in, say, November 2007.
‘Strong evidence is emerging that consumer spending, a bulwark against recession over the last year even as energy prices surged and the housing market sputtered, has begun to slow sharply at every level of the American economy, from the working class to the wealthy.’
“And consumer confidence, an important barometer of economic health, has plunged. Andrew Kohut, president of the Pew Research Center, says consumer satisfaction with the economy has reached a 15-year low, according to the firm’s polling.
“Even wealthier consumers, who were seen as invulnerable to rising gasoline prices and falling home values, are feeling the squeeze.”
I find this less than astonishing. Unless you’ve been living under a rock, you can’t have helped but notice that it costs upwards of $3.40 per gallon of gas to fill your tank so you can get to work or take your children to soccer, band and debate club practice after school. And if you were feeling flush (and anyone could feel flush with a walletful of credit cards)and wanted to keep up with the Joneses two or three years ago, you might even be driving a honkin’ big Hummer around your neighborhood, grinning like a fool and getting about 8 miles to the gallon.
Man, that sure has to sting. I don’t know about you, but I’d start feeling queasy every time I passed a filling station.
If you’ve crawled out from beneath the covers in the last six months, you can’t really have ignored the fact that the housing bubble didn’t just pop, it exploded, and it’s becoming increasingly clear that it’s taking a good portion of the national economy with it. I’m no economist – I have a hard time balancing my checkbook – but even I knew in my heart of hearts that the housing bubble was just about all that was keeping America going. I worried about it bursting, and people looked at me like I was crazy if I brought it up. Of course I got the same looks when I expressed my dismay and concern over the Iraq war. So much for that, eh?
So it doesn’t surprise me at all to learn that my fellow Americans are suddenly spending less of their hard-earned money. The word “sheeple” may best describe post-Sept. 11 Americans , but even mindless sheep have self-preservation instincts.
Perhaps we’re finally cutting back on rich fare like home coffee/espresso machines and $300 handbags from our gluttonous consumer diets because, you know, the mortgage payment on the no-down-payment McMansion just rose by $700 a month.
Some people wonder if we’re already in a recession but we haven’t really felt it yet, sort of like cancer just before it grows fangs and starts munching in earnest. I’ve talked to a few cancer survivors who’ve said they felt like something was “off” for quiet a while before the scary diagnosis was made, but they couldn’t really put a finger on what was wrong. So that’s how the world feels to me, right now. Like we’re teetering on one foot in the dark at the edge of the abyss.
I’ve lived through several recessions in my adult lifetime. Frankly, none of them have hurt me much, probably because I was already poor as a churchmouse and didn’t have any money to spend anyway. I was used to making ends meet somehow. I expect that I’ll manage to get through this recession, too, though it feels far more ominous at the outset than the ones in the past.
“There are mounting anecdotal signs that beginning in December Americans cut back significantly on personal consumption, which accounts for 70 percent of the economy.”
Seventy percent? Oh. My. God. Is it just me, or does that sound absolutely nuts? What’s the other 30 percent? Exported corn syrup?
“There are plenty of recession naysayers. Average hourly wages and salaries have not fallen, and some economists argue that unless — or until — that happens, consumer spending will hold up despite widespread economic unease. According to these economists, what happened in December was a temporary blip.”
Average hourly wages and salaries haven’t risen for most Americans, either, particularly in relation to higher gas, food, and housing costs. And it’s sort of important to remember that December is traditionally the month most Americans spend the most – it's Christmas, and we max out our credit cards and buy those big-ticket items like iPhones and big screen HDTV. And even the things we want that aren’t considered “big-ticket,” like the ubiquitous iPod, cost $300 or more. That’s not pocket change, gang. That we didn't do the spending this last December that we've done in the past is ominous. It sure doesn't seem like a "blip" to me.
“Even in tough economic times Americans rarely reduce their consumption, preferring instead to slow the growth in their spending.”
What does that mean, exactly? That even though the economy is tanking, I’ll consume just as much as I did before, I just won’t spend any more to do it? Hmmm. How does that work? I'm confused. Even if I could wrap my head around the concept, it doesn’t sound like a smart thing to do when a jar of peanut butter or a bottle of salad dressing costs nearly $5, and a loaf of bread nearly $4. Hell, a 14.5-oz. can of black beans goes for $1.19 these days. Wouldn't it be smarter to consume less and spend less, too?
“Official statistics do not yet show that consumer spending has dropped, but they do suggest that in late 2007, it slowed in areas like automobiles, furniture, building materials and health care, said Mark M. Zandi, chief economist at Moody’s Economy.com.”
Yeah, a lot of us decided we could just keep drivin’ the ol’ clunker a little bit longer, rather than buy that new, $120,000 Mercedes roadster. My car just had its 20th birthday and with luck, that chewing gum will hold out until I win the lottery. When you’re facing house payments that are rising like the mercury in a meat thermometer stuck in the Thanksgiving turkey, you don’t worry so much about furnishing those four extra rooms you don’t need. In fact, you probably duct-tape plastic over the heating vents. Bankrupt builders don’t need to buy building materials and hell, who needs health care? We have band-aids and Epsom salts, aspirin and antacids, antibacterial soap and hey, herbal teas. We don’t need to spend the few bucks we have left over after putting food on the table on the $20 co-pay they’ll charge us for walking into the doc’s office.
And those of us without health insurance (and who can't afford it even if we'd like to have it) will just keep crossing our fingers or praying to whatever sky god we prefer that we’ll stay healthy, because without insurance, we're totally screwed.
The NYT story grasps for good news, probably because front page advertisers like Dell computers, AirFrance and Blackberry would prefer Americans not get depressed over the money situation.
“There are some bright spots now in consumer spending. Sales of sports gear and electronic gadgets — particularly G.P.S. navigation devices and flat-panel television sets — have risen over the last three months. To Stephen Baker, vice president for industry analysis at the research firm NPD Group, that suggests there is still enough purchasing power for people to buy what they really want.
“’We probably would not have seen strong sales for electronics products that people really want if the overriding issue was economic,’” Mr. Baker said.”
Mr. Baker, I think you’re pie-in-the-skying it. People who are still buying those expensive items are doing it with whatever they have left on their credit cards, knowing that soon, they won’t be able to buy anything at all with them. It’s the Last Great Credit Card Blowout. After all, we might as well be able to watch the new American Gladiator 5 feet high and 7 feet long in HD, since we won’t be able to afford to do anything else – not even the gas to drive to Pizza Hut to pick up that outrageously expensive, $20 pizza to eat while we watch.