Saturday, August 15, 2009
Consumer Confidence Won't Recover Until Employment Stabilizes
The Washington Post wrote yesterday:
Darkening consumer confidence and plunging prices combined with a generally dismal outlook to dampen hopes for a quick economic recovery...
The decline itself is less meaningful than the fact that economists expected consumer confidence to rise in August. This means the experts underestimated the pessimism of American consumers, which helped send the stock market down Friday...The consumer confidence survey contained two notable findings: the lowest number of consumers in the survey's 60-year history said their personal finances are improving. Many said their net wealth is being hammered by unemployment, shorter hours and diminutive wage gains.
Of course, the government has thrown trillions at the too-big-to-fail banks, but has done next to nothing to help the struggling American people.
In the world of cheerleading corporate talking heads, the following obvious statement by the chief investment officer of $216 billion dollar investment firm Russell Investments (Stephen Wood) stands out as a breath of fresh air:
I think you're going to need to see a material stabilization in labor markets before you get meaningful and stable consumer confidence.Summers, Bernanke and Geithner can prop up the stock, bond and other markets until the cows come home, but if unemployment is still rising, consumers will not be confident, they will spend less, and - because consumer spending equals 70% of the economy - the economy won't really recover.
7 comments:
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Long-term, you're right, but near-term confidence is likely to improve--which will lessen the chances for reform.
ReplyDeleteSee http://animalspiritspage.blogspot.com/2009/08/will-pulse-of-postwar-business-cycle.html
Investors Should Stop "Worrying" About Consumers: They Don't Have Any Money
ReplyDeleteUSA Today tells us that the stock market dropped because investors are worried that consumers have bad attitudes and therefore will not sustain consumption. Consumers may have bad attitudes, but the real reason that they are not spending money is that same reason that homeless people don't spend money: they don't have it.
The collapse of the housing bubble has destroyed more than $6 Trillion in housing wealth. The plunge in the stock market has eliminated another $6 Trillion. The predicted result of the loss of this much wealth would be a fall in annual consumption of more than $500 Billion a year ( @3.5 percent of GDP ).
In short, it would be very surprising if consumption had not fallen sharply. USA Today should find some economists who can explain this fact to readers so that investors can stop worrying and come to grips with reality.
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Dean Baker's comment applies to all amerikan corporate media.
just like the quote of Paul Craig Roberts in an earlier post - the spin is just f***ing relentless and total bullsh*t.
All these armchair pundits are so reassuring.
ReplyDeleteReform? Ah, yes. Reform! Steer a little to the starboard away from these shoals.
Reform isn't what is running through my mind right now as I scour the vastly listing deck of this ship that has had forty yards of keel ripped from her bottom in this storm.
A little pragmatic fix and some more reform and we'll all be lying far below in Davey Jone's locker.
All the pragmatic fixes of the past have crumbled. There is literally almost nothing left of the economy, -nothing. There are just the thieves and the liars.
All the pragmatic fixes of this ship that has kept the whole world's vastly bloated human population floating as if in mid-air... well... They've all come undone.
The banks are foreclosing on literally everything in an effort to keep the ballast in this ship from pulling us all down immediately.
It is all in vain.
We will all soon enough be ripping everyone else apart with war, pestilence and famine.
The conflagration has already begun. It is like a hurricane. Nothing can be done.
Consumer confidence? There are no -consumers- left.
The government is passing laws that are forcing those who have money to regurgitate it from their bellies.
Benign Brodwicz. Improve based on what catalyst or should I say bubble? Can you explain how it will improve without another "bubble" in our debt-based economy because the real economy that everyday people live in has been dormant and living of that debt for the last 30 years.
ReplyDeleteThose comments which the first Anonymous said - is the horrifying truth. That one hurt to read.
ReplyDeleteYes, Morpheus, the Fed and Treasury are blowing another bubble. It is our nature to want to adapt to new conditions and recover confidence. The next downturn will lead us into a deeper depression, by my lights.
ReplyDeleteI don't trust the government to do better spending stimulus money than it did bailout our the banks.
I'd like to see a livable workfare for the unemployed, public health insurance for those who need it, and much higher marginal tax rates on the super-rich who are looting this country. The country is a basket case, financially. Without radical changes, my models suggest (like Faber's) that the big collapse will come in about 2013-2014.
Americans need to hang together during what's coming.
Benign, I roll my eyes whenever people throw out dates. This financial Oligarchy has ballooned to such an enormous size, ironically in step with the bubbles they created, they can pull the plug at any time they wish and crash the system or string it along for a generation of stagflation. The only way things will change is a grassroots movement organized by citizens that would eventually turn into a revolution. The best quote I've read about this crisis is "Organized greed always defeats disorganized democracy" There is such a disconnect with reality that no one can make accurate predictions based on any of the empirical data out there or historical references.
ReplyDelete