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Monday, January 14, 2008

It's all your fault.
Posted by Jill | 6:34 AM
Thus spake the local Fox affiliate (WNYW) on its morning news show today. Yes, folks, the reason we're heading into recession has nothing to do with the imploding housing market, the mortgage mess, or the spiralling amount of debt that George W. Bush is piling on us so he can save face in Iraq till he can head back down to Crawford for a life of clearing brush at taxpayer expense. No, folks, the reason we're heading into recession is because YOU DIDN'T SPEND ENOUGH MONEY AT CHRISTMASTIME.

Did you decide to spend $1500 on a flat-panel TV for the entire family instead of the $4000 you would have paid buying individual gifts for everyone, including a diamond bracelet for your wife, a WII for the kids, and that fur coat your mom has been eying? Then YOU're the reason we're going into recession. Or so sayeth Fox. The article on the web site is more nuanced, but the television teaser was plain that cutbacks in spending by consumers is going to be the tipping point.

Bill Cheney, chief economist at John Hancock Financial Services, puts the odds of a recession as high as 40 percent. "There are a lot of headwinds and the economy probably has enough momentum to get through, but when things get rough, there are a lot of ways things could go wrong," Cheney said.

The fear is that people will clamp down on the spending and businesses will put a lid on hiring and capital investment, sending the economy into a tailspin.

By one rough rule of thumb, a recession occurs when there are two consecutive quarters -- six straight months -- when the economy shrinks.

The National Bureau of Economic Research, the recognized arbiters for dating recessions, uses a more complicated formula. It takes into account such things as employment and income growth. By that measure, the last recession was in 2001, starting in March and ending in November.

Tax rebates aimed at stimulating the economy were part of Bush's $1.35 trillion in tax cuts in 2001. They were credited with helping to make the recession short and mild.


Yes, folks, the forty-six bucks you got from Bush's 2001 tax cuts and promptly spent were what kept the recession from being worse than it was.

I pile on Fox, but the so-called "liberal" paper that just hired William Kristol and whose public editor defended the decision yesterday, climbs on board the "Spend Or We'll Shoot This Dog" bandwagon as well:

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.

The abrupt pullback raises the possibility that the country may be experiencing a rare decline in personal consumption, not just a slower rate of growth. Such a decline would be the first since 1991, and it would almost certainly push the entire economy into a recession in the middle of an election year.

There are mounting anecdotal signs that beginning in December Americans cut back significantly on personal consumption, which accounts for 70 percent of the economy.

A raft of consumer companies — high-end stores like Nordstrom and Tiffany, and middle-of-the-road ones like Target and J. C. Penney — reported a pronounced slowdown in growth last month, and in several cases an outright drop in business.

American Express said that starting in early December the growth in the rate of spending by its 52 million cardholders, a generally affluent group of consumers, fell 3 percentage points, from 13 percent to 10 percent, the first slowdown since the 2001 recession.

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.

“People are clearly concerned that we are headed into a recession,” said Stephen I. Sadove, the chief executive of Saks Fifth Avenue, the upscale department store whose runaway growth throughout much of the year slowed markedly in December.

Gia Trumpler, 37, a travel consultant who lives in Manhattan, shops at luxury chains like Saks. But she is trimming costs where she can by bringing lunch to work from home, rather than eating out. “Everything just feels more expensive to me now,” she said, including the cost of heating her apartment this winter.

[snip]

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.


Someone ought to remind Mr. Baker of all those "eighteen months with no interest" payment plans that go with those flat-panel television sets.

So far, at least, Mr. Brilliant and I are both working. Three-dollar-a-gallon home heating oil is taking a toll, as well as increases in costs for electricity and gasoline, but the fact that we carry very little debt over and above the mortgage and we've delayed or foresworn the gratification of significant interior remodeling of the house until and unless we can afford to pay for it now, means that so far we're not hurting. On the other hand, we're not the kind of spenders that have been propping up this house of cards from the beginning. Still, we're reliant on two incomes, especially with these increased costs, and current economic conditions make us think three times now, instead of just twice, before spending.

So how are YOU feeling about your economic state? What do YOU expect this year to bring?

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4 Comments:
Blogger Joshua said...
I'm feeling lucky as Hell to be single, splitting rent four ways, not owing much of anything aside from student loans, and working in a field that pays well.

But despite all that, there still ain't no big screen TV in my future. I could probably soak the expense and still be ok, but why do that when I can save up a safety net instead? Especially since thngs are bound to get worse before anybody does anything to improve the situation.
1/14/08, 3:44 PM  
Blogger Bob said...
The same Fox with the religionists who claim that marketing the season as "Happy Holidays" rather than "Merry Christmas" is an attack on Christians by liberal secularists in the retail industry. So now Christians are bad people too, when they try to avoid the excesses of the season & the huge credit card debt & celebrate with modesty & thoughtfulness. The unreliable, frugal consumer is a bad American.
1/14/08, 5:59 PM  
Anonymous Anonymous said...
i am almost getting by.


really, it's remarkable how over the past few years i've gone from being able to put money away in a 401(k), and have assets like stocks and mutual funds, to a point where i am living paycheck to paycheck, and in no way covering all necessary expenses, have no savings and juggle credit cards.

granted, there were certain catastrophic events -- a house fire, an ugly divorce -- but the fact is that the wage increases that could reasonably have been expected are not there, just as costs on most basics have started to take off. i came from an upper-middle-class background, have had a job that pays decently by any standard, even nyc's, and yet have turned into a working-classer.

there's no shame in that, but it sucks. especially for my kids.

there's a lot of personal responsibility i recognize-- like trying to get a job that pays better. but there's no question that i feel my situation reflects something going on in the country at large, the bush legacy's economic shakeout that leaves two sides and two sides only: the haves and the have-nots.
1/14/08, 8:14 PM  
Anonymous Anonymous said...
I believe Merrill Lynch is correct about the arrival of recession in the United States. The housing downturn is negatively impacting property sales in second home communities in Florida. This is also slowing sales in NC mountain resorts that depend on Florida buyers.

Still the downturn in prices and building of inventories is starting to attract second home buyers from Florida looking for cool temperatures in our mountains. Also the dramatic decline in the dollar combined with weakness in American real estate markets are beginning to attract bargain hunting European investors.

Ron Holland, Broker/Realtor with Wolf's Crossing Realty. See www.ronaldholland.com Ron markets resale mountain and ski resort properties in NC in Wolf Laurel and The Preserve at Wolf Laurel.
2/5/08, 2:09 PM  
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