Free Markets, Free People


Quote of the day – why we’re not yet in a recovery edition

Yeah, I know, there are technical definitions of what constitutes a recession and a recovery.  But if you’re unemployed, underemployed or given up on finding a job, you find  none of those technical definitions unimpressive.

Anyway, this particular quote, in a nutshell, tells you why the “recovery” isn’t much to write home about:

Data released by the Bureau of Economic Analysis at the Commerce Department this morning shows that Americans earned a bit more, spent a bit less and saved more in June — all in line with economists’ expectations. Consumer spending drives about 60 percent of the economy, therefore, economists do not expect the recovery to take strong hold until American families feel secure enough and are earning enough to spend again. Unemployment, of course, remains a major drag on the economy.

So, while savings is good in general, it’s not good in a macro sense when you’re in a recession.  And, as the quote notes (and I frankly think the number is low) when 60% of the economy is driven by consumption, increased savings and less spending is not a good sign.  It’s all about confidence, and consumers simply aren’t feeling it.

That may be because of the last sentence which has my vote for the understatement of the year. 

The good news, however, is there was nothing, apparently, “unexpected” about these numbers.

~McQ

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4 Responses to Quote of the day – why we’re not yet in a recovery edition

  • Consumers paying down debt is a good thing. You can make all the arguments you want about the Paradox of Thrift etc but the bottom line is that we are suffering through the disaster of a credit boom gone very bad. Fixing that takes time and pain. There’s no other way to set the stage for a revival of significant growth. I’m all for identifying and stringing up the bad actors, but our government doesn’t have the stones to do that since they were part of the problem.

    • First, you’re assuming that’s what is happening, but “saving” doesn’t necessarily connote “paying down debt”. It might instead the the economic equivalent of “stocking up on food and ammo”.

      Secondly, regardless, if 60% or more of the economy is driven by consumer spending, whatever they’re doing with the money short of buying consumer goods doesn’t bode well for the economy or unemployment.

      • In my case savings means buying up gold. I started buying about this time last year and have already seen about $5000 appreciation. 

        But I am keeping a lot in cash also, just for emergencies.

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