Posted on 04/05/2008 9:12:37 AM PDT by Notary Sojac
The gloomiest outlook for the economy in 35 years may be forcing Americans to live with what they have and to save up for what they want.
"I'm a little rattled," said Lynda Nicely, 28, of West Allis, Wis. She has taken a second job and plans to hoard three months' worth of emergency cash in case she loses her primary job.
Lynda Nicely has been living in a sparsely furnished rental apartment in a Milwaukee suburb since October while she saves enough money for furniture at a secondhand store. And when temperatures soar this summer, she plans to buy a fan, not an air conditioner.
“I am a little rattled,” said the 28-year-old resident of West Allis, Wis., who took a second job as a waitress and plans to hoard three months' worth of emergency cash just in case she loses her primary job in public relations.
A growing number of anxious people across all income segments are shopping at less-expensive stores, reacquainting themselves with the library, paying down credit card debt and cutting back on new clothes and cars, vacations and meals out.
The psychology of the American consumer has turned as worries heighten about the job market, the slump in real estate and soaring daily living costs.
Industry followers say shopper's fear, which has been escalating since July, could very well worsen what ails us.
Such spending cuts could be “a self-fulfilling prophecy” and could hasten the economy's slide, said Lynn Franco, director of The Conference Board's Consumer Research Center.
“I don't think (the slump in consumer spending) has bottomed out,” said Candace Corlett, principal at consulting firm WSL Strategic Retail. “Shoppers are learning a new behavior: how to resist temptation. There is a lot of fear out there.”
Such worries are driving shoppers to cut back on big-ticket items such as appliances, to delay redecorating their houses and to shop at discounters and thrift stores for secondhand clothing. They're particularly avoiding full-priced fashion chains and department stores at the mall.
Consumers have every right to be nervous – the government data out yesterday showed unemployment and job losses were higher than expected. It also reported only modest wage growth, which makes people feel as if they are losing money as food and gas prices keep rising.
Consumers' economic outlook for the next six months is at a 35-year low, levels not seen since the oil embargo and the Watergate scandal, according to a reading last week by the Conference Board, a business-backed research group. The report showed that fewer consumers plan to buy big appliances such as air conditioners, TVs and refrigerators within the next six months.
Retailers struggled through yet another sluggish month, with March sales at stores open at least a year expected to fall slightly from a year earlier, according to the International Council of Shopping Centers-UBS tally.
J.C. Penney Co. warned last week of at least a 10 percent drop in same-store sales for March and slashed its first-quarter earnings forecast. Retailers are set to report final figures Thursday.
Many analysts expect only a small sales lift starting in May when consumers begin receiving rebate checks from the federal government's economic stimulus plan, but any bump should be only temporary. Michael P. Niemira, chief economist at the shopping center group, believes the malaise could extend into next year.
Consumers also are increasingly concerned about inflation, with the Department of Energy anticipating that gas prices nationwide will peak near $3.50 a gallon this spring. Many analysts believe prices could go much higher.
Mounting debt payments also are making shoppers cut back on items they can live without. U.S. families now spend more money on debt service – absorbing more than 14 percent of disposable income – than on food, which accounts for 13 percent, according to a Merrill Lynch & Co. report.
That is higher than during the last recession in 2001, when 13.2 percent of household disposable income went toward debt, Merrill Lynch said.
That shows how “deep the credit problem is in terms of its impact on household cash flow,” wrote Merrill Lynch economist David Rosenberg.
The latest Labor Department figures didn't give consumers any comfort. Employers slashed 80,000 jobs in March, the most in five years and the third straight month of losses. The national unemployment rate rose to 5.1 percent from 4.8 percent. Over the past 12 months, wages grew 3.6 percent, slowing from about 4 percent growth early last year.
Job security is key to consumers' willingness to spend, and amid the persistently dreary news, many are taking drastic measures.
Given all the anxiety, Corlett says, retailers need to reassure consumers that shopping at their stores makes “smart use of their money.”
Thrift stores across the country are seeing a surge in business as shoppers shift to buying used clothes or selling items from their closets to get extra cash. Buffalo Exchange, a secondhand-clothing chain based in Tucson, reported a 17 percent rise in sales at established stores so far this year – the biggest gain since the late 1980s, co-owner Kerstin Block said.
Trend analyst Faith Popcorn, founder of the consulting firm BrainReserve, sees the “stripping down” trend as positive.
She expects that consumers will start growing food in their own gardens and learn to extend the life of worn garments by mending them.
“I think we are going back to the '50s decade,” Popcorn said.
Oh, the horror.....
Is somebody pulling my leg?
Why is it news when this is something most responsible people have always done?
She plans to hoard the money? A responsible person would have more than that on hand anyway.
If we don’t stay in debt, spend more than we earn and budget, we are going to ruin the economy?
Is this the inverse of the consumer confidence index?
I know really, I can’t buy the 500 dollar processor I want for my gaming rig unless I save for a few months. Even more horrifying I have to wait a few weeks between buying new pc games instead of buying all of them at once.
I tell you we might as well be living in Africa things are so brutal in this country.
“hoard”
You picked up on that too. Makes you wonder about the author.
Here’s a hint..get the hell out of Milwaukee. I can’t imagine anyone wanting to live there anyway....
Journalists are SO lazy, and so near-sighted. Pitiful.
That's the only way I can interpret America's economic policy.
“The latest Labor Department figures didn’t give consumers any comfort. Employers slashed 80,000 jobs in March, the most in five years and the third straight month of losses. The national unemployment rate rose to 5.1 percent from 4.8 percent. Over the past 12 months, wages grew 3.6 percent, slowing from about 4 percent growth early last year.”
One more thing...the numbers don’t even approach the typical 7% unemployment one finds in a “Real Recession”....these MSM morons were staining their own blue dresses when Clinton had a 5.1 unemployment rate...disingenuous aholes!!!
I know a lot of people who live from pay check to pay check. I was in that condition a long time ago but worked my way out of it.
She is quite well-known. You can’t forget a name like that.
She’s in marketing/PR and knows how to publicize herself and her ventures.
I think retailers have themselves to blame. They are no longer customer oriented. The sales staff are little more than there just to make sure people don’t steal and the merchandise turnover is poor. merchandise is bought only with cost consideration, not whether the consumer will actually be interested in buying the product.
They are constantly having sales, conditioning consumers to know when to expect a significant mark down.
I guess it's news when people are doing it despite the battering ram of government policies which are specifically designed to punish responsibility.
Is somebody pulling my leg?
Don't forget "Lynda Nicely" in the story. Now, let's not ruin the economy-sabotaging intent of this story by looking at details such as made-up names, or the like.
Try to see the bigger picture. O'Hussien will save us.
No, she's a famous marketing guru. I have some of her books.
The '50's were the last really free, good decade. After that, we've slid steadily downhill.
Today, few follow the: Use It up; Wear It Out; Make It Do; or Go Without!
And now I am going to say something that will alert the rabid MORMON bashers.
MORMON MORMON MORMON
(just wanted to give them time to ping one another - s/)
The Mormon's have long been advised to have a years storage of food and supplies as well as a few months worth of money. This is to cover emergencies like illness, loss of job, natural disasters or man-made ones.
Seems pretty reasonable and responsible to me - but seeing as it's a Mormon practice, I'll now put on my flame-protection hat.
We can all cut out a lot of spending on frivolous crap and still have a satisfactory standard of living.
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