Two interesting front page articles this morning expand on several of our favorite themes.
The first, the NYT’s A Reluctance to Spend May Be a Legacy of the Recession, treads over some well worn ground with anecdotes and data. The anecdotal stuff is the usual mix of sad tales, and psychology, some signs of improvement and recovery.
Two data points worth noting are:
“Between 2003 and 2007 — prime years of the housing boom — the net worth of an American household expanded to about $540,000, from about $400,000, according to an analysis of federal data by Moody’s Economy.com.
Now, the wealth effect is working in reverse: by the first three months of this year, household net worth had dropped to $421,000 . . .
As recently as the middle of 2007, Americans saved less than 2 percent of their income, according to the Bureau of Economic Analysis. In recent months, the rate has exceeded 4 percent.”
What is omitted from the article is the why: 3 asset class collapses (Stocks, Housing, then Stocks again) will wreak havoc with yor psychology. Add to it shrinking Real Income, and voila! Consumers find frugality to be their new mantra.
The WSJ takes a different tack, looking at the advantages of larger versus smaller firms — but using the same anecdotal hooks to tell the story (I omit anecdotes for the obvious reasons):
The U.S. recovery is a tale of two economies. At one extreme of Corporate America is a cadre of companies and banks, mostly big, united by an enviable access to credit. At the other end are firms, chiefly small, with slumping sales that can’t borrow or are facing stiff terms to do so.
On Main Street, there are consumers with rock-solid jobs — but also legions of debt-strapped individuals struggling to keep their noses above water.
This split helps explain the patchiness of the recovery that appears to be taking hold after the worst recession in a half-century . . .”
Both of these are well worth your Saturday morning reading time . . .
A Reluctance to Spend May Be a Legacy of the Recession
PETER S. GOODMAN
NYT, August 28, 2009
Halting Recovery Divides America in Two
CARI TUNA, LIZ RAPPAPORT and JULIE JARGON
WSJ, August 29, 2009
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