News from the retail world is not good. Sales midway into the back-to-school period are trending significantly lower than this time last year. In fact, last year sales were up 1% (over the prior year) and this year the projection is that sales will be down 3% - 4%.
So, notwithstanding the best efforts of those who have an interest in seeing consumers start spending again -- those opining that the recession/depression is ending -- consumers are done being told how and when to spend their money. For the last decade or more, consumers were told how to spend their money as the experts, the conflicted and the government advised that:
(1) Long term, you always make money in the stock market,
(2) There is no better investment than buying your own home, and
(3) We have learned how to control booms and busts.
And most of us acted in reliance on that sage advice -- to our detriment.
Now, finally, consumers are taking control. Retail sales are down because consumers don't think we are out of the woods quite yet. Stock holdings are still down about 40% from the highs. And home prices are way down too. Credit card companies are canceling accounts and tightening usage. Those of us fortunate enough to have jobs know plenty of people either unemployed or underemployed - perhaps as much as 20% of the work force. Productivity is up -- which sounds good in the headlines -- but which means that companies are getting more production out of fewer workers.
People understand what is happening in our economy. They realize that without the Stimulus Bill and a $1.8 trillion 2009 deficit, things would be much worse. They realize that the money being used to prop things up is not going to last forever and, is really just we adults borrowing from our grandchildren.
I am happy that consumers are finally taking charge and thinking for themselves. Since consumer spending represents about 2/3 of our economic engine, the economy will recover when consumers feel the time is right -- not when someone else tells consumers "it's safe to go back in the water."
I also hope that we consumers get it right this time. That we will not take on blind faith what others tell us -- especially those who have an agenda to see us borrow and spend. I hope that we will do our own homework, will invest the time and energy needed to make good decisions with our money, will educate our children, and will use our collective power to force change on those who pushed us to the brink.
Jim Randel is the founder of The Skinny On book series. His first book, The Skinny on the Housing Crisis, was awarded First Prize in a competition sponsored by NAREE, an organization of 650 journalists.
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