Consumerism is back, with an asterisk

Published 12:00 am Wednesday, August 20, 2014

BOSTON — Written off in the aftermath of the Great Recession, the U.S. consumer is back. Not quite with a vengeance, but definitely back.

Consumption powers about two-thirds of all U.S. economic activity, and it’s noticeably back. Spending by the rich never really tailed off, and it accelerated alongside the soaring stock market gains of recent years. On the bottom economic rungs, the poor still struggle. So much so that Dollar Tree and Family Dollar recently announced plans to merge to compete against Wal-Mart for what Family Dollar CEO Howard Levine called “a more financially constrained consumer.”

But across the broad middle of the income spectrum, a bevy of indicators shows that ordinary Americans feel better about the economy and are loosening the purse strings. The most obvious example is car sales, on pace to exceed 16.3 million this year. “It gets better all the time, but it’s not even,” said Michelle Krebs, an analyst with AutoTrader.com.

Jobs are another important signpost for future consumption. There were 4.7 million job openings in June, the highest level since February 2001, and a signal that companies are more optimistic about their future and want to hire accordingly.

At the same time, roughly 2.5 million Americans quit their jobs last month, the highest since June 2008. That’s a good thing, because it means people feel confident they can take advantage of other job opportunities.

Another indicator is the Consumer Confidence Index, published monthly by The Conference Board, a business research group, which finds that people’s confidence in their current situation is finally matching their traditional optimism about the future.

“This is the consumer saying … it finally has gotten better,” said Ken Goldstein, a veteran economist with the group.

The result? Goldstein said that pent-up consumer demand is about to be unleashed after several false starts. “Finally, here it is, it’s finally happening,” Goldstein said.

Consumption would be even stronger if not for constraints. It’s growing an average of 2.2 percent a year since the recession ended in 2009. That’s healthy. But it’s still below the 2.9 percent annual average in the previous economic expansion from 2001 to 2007. People are still carrying a relatively high level of debt and can’t, or won’t, borrow more.

Many Americans also fret the lack of wage growth. And consumers also remain wary after being burned in the Great Recession. “Even though it is several years ago, it has a lasting effect,” said Jack Kleinhenz, chief economist for the National Retail Federation, who added that “the ‘shop until you drop’ kind of thing, people aren’t in that kind of mode anymore.”

It’s not to say consumers aren’t spending — they are — but not with abandon.

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