The federal Bureau of Economic Analysis today released its first deep dig into state-by-state personal consumption expenditures going back to 1997. Washington turns in the strong performance one would expect from a prosperous state with a diverse economy. For example, per-capita expenditures here grew 3.6 percent from 2011 to 2012 vs. the national average of…More
Category: Consumer spending
Four years after the official end of the recession, the average American household has recovered only 62.8 percent of the wealth it lost in the crash. The findings come from a new report by William Emmons and Bryan Noeth at the Federal Reserve Bank of St. Louis. That’s in real dollars. All household net wealth has rebounded 114.3 percent from the trough to a record high, but it doesn’t account for inflation or increased population. Adjusted for these factors, the number is well below where it stood in 2006. And the recovery is highly uneven, mostly benefiting the better off with the stock-market boom and saving the big banks.
According to the Fed’s Survey of Consumer Finances, household finances were “severely” affected by the downturn. Median household wealth dropped 39 percent. Among those worst hurt were the young, those with less than a college education, minorities and those carrying heavy debt. With wages largely stagnant, wealth was increasingly dependent on housing, which was in a bubble. In a separate essay by Emmons and Ray Boshara, the importance of household balance sheets to the larger economy is explained. This element was largely discounted by many macroeconomists before the collapse.
It has come as somewhat of a surprise, therefore, that many economists now are calling the Great Recession of 2007-09 a “balance-sheet recession” and that balance-sheet failures of the type described above are seen as important contributors to the downturn and weak recovery.
These are challenging days for customers who are paying attention. I am uncomfortable with the ubiquitous term “consumer,” as it denigrates our responsibilities as citizens and participants in the marketplace. Anyway, in April a garment factory in Bangladesh collapsed, killing more than 1,100 souls. Much of the clothes produced there were for Western retailers. Some reform efforts are being attempted, but not much is expected to change the wretched conditions in most sweat shops. It’s a vicious cycle of globalization, as we have become accustomed to cheaper clothes even as our garment jobs have disappeared. As late as the 1990s, about 50 percent of the apparel Americans bought were made domestically; now it’s about 2 percent. As with so many other sectors, “cheap” in garments has been a “tradeoff” for people losing decent jobs in sectors that went offshore.
This week, Apple was in the spotlight for its tax avoidance, although it’s hardly alone, especially among technology companies. CEO Tim Cook won over some senators, but, as Tim Fernholz writes in Quartz, the hearings showed just how pervasive the problem is in the United States as a post-industrial economy. As the biggest companies pay little in taxes, especially as opposed to the past, smaller firms pay more and the American commons — from schools to infrastructure — suffers from chronic under-investment. The tech outfits’ posture is particularly twisted considering how much they have benefited from taxpayer funded research. But citizens who patronize these firms “vote” to support their behavior with every purchase.
We’re hit with these kinds of stories nearly every day. Wal-Mart is its own category of problems for an ethical buyer; Amazon.com, like Wal-Mart, is killing local retailers. Every time we fill up the gas tank, we do our part to degrade the environment and add to the costs of the military need to keep the oil-supply lanes open. But will this knowledge really change our behavior when it comes time to buy?
Read on for the best links of the week and the haiku.More
The final toll of workers killed in the collapse of a garment factory in Bangladesh is 1,127. It is a staggering tally of loss. By contrast, the infamous 1911 Triangle Shirtwaist Factory fire in New York City killed 146. The Triangle fire, where factory managers had locked fire-escape doors, galvanized the Progressive movement in America, leading to new safety codes, labor laws and increased unionization. Such a favorable outcome in Bangladesh is much less likely.
As the Seattle Times’ Amy Martinez reports, officials at Nordstrom are scrutinizing the safety conditions at the three Bangladesh factories where some of its garments are made (none were made at the factory that collapsed). Benetton, H&M, Joe Fresh, Mango, Tesco and Zara are among the companies that are pushing a binding agreement that requires them to help pay for better safety conditions at Bangladeshi apparel factories. Gap, Sears, and J.C. Penney are among others who have yet to sign on. Gap, for example, has said it fears lawsuits from American lawyers. Wal-Mart, the biggest player, is drafting its own plan, but critics worry it won’t be enough to prevent further deaths.
In addition to the lack of a united front by Western retailers, the Bangladesh government is corrupt and deeply captured by the international garment industry. Ready made apparel is the poor country’s largest export. The government did say it would allow garment workers to unionize and raise the minimum wage, but it’s unlikely these reforms will do much good in such an environment.More
Puget Sound companies put in a respectable showing in the 13th annual Best Global Brands report from Interbrand, a consulting outfit owned by the Omnicom Group. It ranks brands the top 100 brands based on “ongoing investment and management of the brand as a business asset.” Among the criteria: Brand strength (“the ability of the brand to secure the delivery of expected future earnings”); financial performance and the role of brand (“the portion of the decision to purchase that is attributable to brand–this is exclusive of other aspects of the offer like price or feature”).
Microsoft is No. 5 out of 100, followed by Amazon.com at No. 20, and Starbucks at 88. Oregon’s Nike placed at 26. The top spot went to Coca-Cola, followed by Apple.
Amazon was the second biggest brand riser, up from 36 in 2010 and 26 in 2011. The survey comments, “…Amazon has much to celebrate. However, its unfriendly stance toward unions, hardball battles to evade sales taxes in certain parts of the U.S., and a highly publicized story about the harsh treatment of workers in a Pennsylvania warehouse last year have put a dent in the company’s image. To leverage the full potential of its brand, Amazon needs to manage the reputation of its business and work to improve employee relations.”More
A new report from the Federal Reserve shows that the financial damage from the Great Recession continues to batter American families. The Flow of Funds survey says the total household worth fell 4.1 percent to $57.353 trillion in the third quarter, the second consecutive quarterly decline.
Although the market rallied in the fall — we’ll see if this continues — household financial assets, which includes stocks and mutual-fund holdings, sank 5.3 percent to $47.737 trillion. Holdings of real estate rose fractionally to $18.2 trillion, but that’s still 1.2 percent lower than in the previous year’s third quarter. Meanwhile, companies continue to hoard cash and other liquid assets: Those increased to $2.1 trillion, the fifth straight quarterly gain. Data geeks can download the entire report here.
The bottom line is yet more evidence that average Americans continue to struggle to recover from the downturn. Household debt fell a bit, but there’s much more deleveraging yet to go. Among other things, this adds to the uncertainty of how the holiday shopping season will play out. For the 99 percent, we’re a poorer nation than before the great crash. Washington, D.C., is politically paralyzed and doing nothing to address this.More
I’ve been out among the crowd this morning at Westlake Park awaiting the Macy’s parade. An informal survey says many plan to stick around and look, maybe even shop. Black Friday is a constuct of the retail industry but it doesn’t give a good picture of the overall shopping season. And even that can mislead. As NYU economist Nouriel “Dr. Doom” Roubini cautioned today, “Retail sales provide biased measure of consumption spending by households as they are sharply cutting back discretionary service spending.”
So, today’s poll:
Feel free to tell your Black Friday experiences in the comments section. And read on for the best economics stories of the week.More
Thanksgiving looms with plenty of storm flags. The HSBC China Manufacturing Purchasing Managers Index showed its biggest drop since March 2009, in the depths of the recession. A debt auction by the German government, with the strongest economy in Europe, drew the weakest demand since the introduction of the euro. Consumer spending slowed, growing by just 0.1 percent in October. The Federal Reserve announced new stress tests for major banks (we may get more of a sense of exposure to Eurozone contagion). And Pimco’s Mohamed El-Erian called U.S. economic conditions “terrifying.”
Otherwise, the holiday shopping season is shaping up to be hunky-dory.
Beware the early reports. They’re almost always wrong. It usually takes until January to get real data on how retailers performed in this most important selling season of the year. We know millions are strapped, unemployed, underwater and continuing to face a historic debt overhang. This, plus the economy continuing to slow, with third-quarter GDP growth revised down from 2.5 percent to 2 percent.More
Every once in a while market moves coincide with broader reality and that’s what’s happening now. Tuesday’s big swoon in the Dow was the worst in two months and after eight days of carnage the index is headed for its longest decline in thirty years. I’m not the only one who has that summer/fall of 2008 feeling, when the feds were playing catchup to the panic and thought letting Lehman fail would be a really, really smart idea. The market sniffs recession.
Once again: The debt was never the immediate problem. Growth is. The “compromise” will merely slow growth further while doing nothing to promote stability. Friday’s jobs report will be pivotal, but, the ADP hiring survey notwithstanding, it’s likely to be grim, following on anemic reports this week on manufacturing, services and consumer spending. GDP grew at only 0.9 percent for the entire first half of the year. And that’s just the start of the damage. The Economic Policy Institute estimates the budget deal could cost 1.8 million jobs by 2012. The Eurozone crisis also continues.
The Federal Reserve is mighty silent. The best we have is the Onion’s parody of a drunken Chairman Ben Bernanke opening up at his neighborhood bar. ” ‘Look, they don’t want anyone except for the Washington, D.C., bigwigs to know how bad s*** really is,’ said Bernanke, slurring his words as he spoke.”More
Most economy watchers won’t really know how holiday retail sales have performed until next month. Unless you’re in the real-time, proprietary war rooms of Macy’s, Nordstrom, Costco or Wal-Mart, the variables confronting the observer are just too many. For example, what does the anecdote of a huge crowd of shoppers mean? Are they buying or just looking? And are retailers commanding strong profit margins? Or are they clearing shelves on deep discount?
Nevertheless, this is the season that is critical to the retail industry. For many small independents, it may be the last gasp. So let’s set the table. It’s three years since the economy collapsed, so a chance exists for pent-up demand. Those who are employed may feel more confident about spending. If they’ve deleveraged their credit cards, and many have, so much the better. Inflation is next to nothing, so good deals abound. Fears of a double-dip have abated.
Some of the Fed’s QE2 money may actually make it to Americans, rather than being gambled as hot money in world markets by the big playerz. If so, this could be a decisive plus for the retail season. Most high-income shoppers are doing quite well anyway. And all Americans probably have cabin fever after so many bad years — shopping, being “consumers,” has become part of the national character. And unlike the Great Depression, credit remains abundant for millions.More