The economic news has been optimistic over the past week or so. The Fed Gray Book sees economic activity picking up, and many experts project that the economy will begin to grow slightly over the second half of the year.
The housing market appears to have bottomed, and the overall velocity of economic decline has slowed markedly from the end of last year. (That rapid decline, so recent and so vivid, still leaves many of us slack-jawed in awe.)
While some pundits believe the economy will bounce back rapidly, most look for a modest and protracted recovery, with consumers continuing to shoulder economic pain at the hands of a slack job market. Productivity will increase from the bare bones levels we’ve hit, but not at a rapid enough pace to replace the jobs that were lost.
I came across three slides yesterday that helps to put the decline in perspective, and to frame the impact the economic decline has had on consumer habits.
The first two slides are from Donald Marron’s blog; the third is from Calculated Risk. The take-away is that government spending and a shift in the trade balance has offset a broad-based decline in all other facets of the economy. And consumers have made substantial changes to their spending habits — the savings rate was above 5% again in June. Frugal, cautious, prudent: these are not words we’ve associated with the American consumer in the past decade.
