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It's that time again. The time of year when many people look at the calendar and assume that the next twelve months will be better than the last twelve were. Already there is plenty of evidence that policymakers see a textbook economic recovery, businesses anticipate a healthy rebound in sales, and investors are penciling in sizeable profit increases. However, the average American seems to have a slightly different perspective. As the following reports suggest, they are not thinking about spending, borrowing, and keeping up with the Joneses. Rather, they are seeking to retrench even further, to keep paying off debts, and to save more than they have during most of the past several decades.
"Weak Economy Motives Americans to Save More" (Washington Post)
As crazy as it sounds, losing a $70,000-a-year job has been good for Marty Morua's finances. The former Wall Street stockbroker says the setback forced him to scrutinize his family budget and snip away at expenses. And soon, even with less income, their savings grew.
First, he and his wife decided to live on her salary so he could be home with their 5-year-old daughter after school. Without a nanny, they saved $12,000 a year. He dropped services he didn't use on his cellphone -- texting and video games -- to pocket $250 a year. He took a defensive-driving course for a 10 percent discount on his auto insurance and dropped car-rental and roadside-assistance coverage, for an extra $150 a year.
For holiday gifts, he turned to thrift stores and gave home-baked cookies.
"When I was working, I didn't look at the price tag," he said. "In a strange way," he added, losing the job "has been a blessing to teach me how to become aggressive and wise about saving and ways to save -- areas I never would have thought about."
The recession has caused a seismic shift in the consumer culture, converting die-hard spenders into savers. A growing number of people, either smarting from a job loss or spooked by the financial crises of others, are scrambling to get out of debt, establish emergency funds, and add to their retirement and savings accounts.
After having taken the first plunge by cutting holiday spending, many are seeking more substantial ideas on how to sustain their frugality.
With the turn of the calendar, financial planners and counselors typically get an influx of calls from people seeking help with New Year's resolutions to save money. This year, the requests have multiplied.
"Before, people came to us when they hit a crisis. Now they come to us as a preventative measure," said Emily Appel, director of the savings program at Capital Area Asset Builders, a nonprofit organization in the District that mainly counsels low- and moderate-income residents.
"Signs of Tough Times Linger" (Boston Globe)
US consumers are spending, but with caution, and a focus on relieving debt
Now that Christmas is over, will people keep spending?
Not for a while, say economists and consumer analysts. While surveys reveal that many consumers feel the worst of the economic crisis is over, that does not mean they expect things to get wildly better anytime soon. And that translates into cautious spending well into the middle of 2010, as well as a renewed focus on reducing debt and building savings.
Take Tom Moses, 54, a technician for Verizon Communications who survived layoffs because of union protections for longtime workers. While the Rockport resident said he feels lucky, he worries about his 26-year-old daughter, who was laid off from a part-time retail job. His wife works for an agency that relies on state grants, which may be affected by shrinking tax revenues. “The situation’s not good,’’ he said. “Everybody’s in jeopardy.’’
That makes Moses wary of opening his wallet. Unless a purchase is absolutely essential such as, say, the repair of a furnace, he is going to hold off for a while. “A new car? I don’t think I’d do that right now,’’ he said.
Such tight-fisted attitudes portend a slow recovery because consumer spending drives about 70 percent of the US economy. This month’s consumer market forecast from IHS Global Insight, a Lexington research firm, projects a much more gradual increase in consumer spending than is typical of economic expansions because of weak growth in disposable income.
"Recession? Teenagers Get It, and Are Cutting Back" (New York Times)
After a year of observing their parents pinch pennies and fret about the economy, the nation’s teenagers may be coming to grips with reality.
Sales are down sharply in recent months at nearly every major retail chain catering to teenagers, and interviews with teenagers suggest that the reasons go beyond their own difficulty finding part-time jobs.
“I think my sister and I, throughout this year we’ve kind of lost an interest in getting gifts and things like that,” said Morgan Porpora, 16, who in the past had a list of things she wanted for Christmas. “I guess we’ve noticed the economy and we just kind of even feel bad I guess asking for a lot.”
Last month, stores that specialize in clothing and accessories for teenagers were the worst-performing sector in all of retailing, posting a 7.8 percent year-over-year sales decline, according to Thomson Reuters.
Sales at stores open at least a year, a measure of retail health known as same-store sales, tumbled by double digits in November at Abercrombie & Fitch, Hot Topic and American Apparel. Same-store sales also declined at Zumiez, Wet Seal and American Eagle Outfitters.
Teenagers’ growing mindfulness about money is influenced, of course, by the way their parents are cutting back, and by a record-high teenage unemployment rate. But the biggest factor, according to the teenagers themselves, is that they have come to understand the social moment.
“As me and my brothers get older and we realize the implications of the recession,” said Sarah Berger, 16, “we just kind of value presents and gifts less.”
Ms. Berger was among more than a dozen teenagers talking about shopping and spending last week at a roundtable in Armonk, N.Y. Similar gatherings have taken place across the country, all of them organized and moderated by John D. Morris, an analyst with BMO Capital Markets who uses the sessions to glean insights about the health of the teenage retailing market. A reporter asked to attend the New York meeting, which took place one night around a dining room table in the home of David Taitz, 16.
