December 29, 2003 October is Koufax Pledge Drive month
Whence now the American consumer?
While I've been noticeably absent from the pages of Wampum since taking a seasonal CSR position (yes, I'll finally say it, at Maine behemoth LL Bean), I have been intently following a few sectors of the economy during my few hours off. With the madness of "peak" now over, I spent this weekend synthesizing much of the data I've stored away over time. And between such, and that which I saw first hand at the nation's largest mail/phone order business, I'm frankly pretty concerned about the health of the Bush's so-called economic recovery.
Bean itself did fairly well this holiday season, due mostly, I would argue, to a fluke of Nature, i.e. early December blizzard which kept shoppers out of the malls and near their telephones, and I'm sure many Bushies would like to point to such as evidence that consumers are in fact regaining their confidence and "all is well". However, consumer confidence, while low in the polls, never did translate much to action; healthy retail sales, fueled by low mortgage rate-spurred home refinancing and child-tax credit checks, prevented a relatively moderate and short recession from turning into a full-fledged economic meltdown. And while many "high end" retailers, including Bean, did relatively well this season, many stores frequented by average Janes and Joes, found their cash registers wanting.
Anyone keeping a close eye on some specific economic indicators shouldn't be all that surprised. While overall personal income has increased over the past five months, hourly wages for non-exempt workers has remained flat, even retreating slightly with CPI factored in.
For my less "visual" readers, here are actual numbers:
| Month | (current dollars) | (constant 1982 dollars) |
| November 2002 | ||
| December 2002 | ||
| January 2003 | ||
| February 2003 | ||
| March 2003 | ||
| April 2003 | ||
| May 2003 | ||
| June 2003 | ||
| July 2003 | ||
| August 2003 | ||
| September 2003 | ||
| October 2003 | ||
| November 2003 |
I waded back into the BLS archives, and from 1994 on, the period which such data is available online, this is the first time such a period of stagnation of wages in current dollars has occurred. In addition, as I mentioned back in October, this is the smallest annual increase in 1982 dollars in that period as well.
So while the Census Bureau reports that "personal income" has increased over this time, it's not coming from worker bee wages. And the possible alternative sources of income, the recent tax rebates, capital gains from the bubbling stock market, cash-outs on mortgage refinancing, etc., are disconcertingly short lived or volatile.
The Census Bureau also reports on personal spending, which, while rebounding slightly this month (though not as much as market analysts expected,) has been relatively flat in recent months. There's a host of reasons for this besides the stagnation in average wages discussed above. One of the elements which has kept consumer spending chugging along is showing a distinctive cooling trend; new home purchases. For the past three months, new homes sales have defied analysts' assessments and declined substantially, most likely in response to climbing interest rates. Fewer new homes, fewer durable goods, such as refrigerators and washing machines, needed to outfit those homes. Last week, durable goods orders tumbled 3.1%, and while this leading indicator is highly volatile, the decreases were across the board, a much, much more worrying trend. Non-defense capital orders, that piece which economists track as a sign of business "consumer" spending, fell more than 6%, the largest drop since July 2000.
Besides low mortgage rates, the other impetus for consumer spending, the Bush tax bribe rebates are now spent. Unless Republicans in Congress are willing to hand out more checks, the stimulatory effects are now history. And from the spin out of the White House these days, "trickle down", aka voodoo, economic principles, are back in vogue. Of course, should foreign investors pull out of US markets due to the sliding dollar, we may see the son take the same position as his father did in the 1980 Republican primaries.
I honestly don't know if these trends are enough to derail the fragile, still mostly jobless, recovery, but I'm significantly more worried today than I was a month ago (and I was feeling rather uneasy as that point, with soaring natural gas prices and Bean's sales falling below projections for much of November.) I guess my nails will remained chewed down for the next month or so as the cards play out.
[update: slight revision in awkward wording]
Posted by MB Williams at December 29, 2003 09:35 AM | TrackBackYou know, looking at the data month-by-month is not healthy. Every little up tick and down tick will make your mood swing.
Of course, some expenditures are going to be lower. The growth last quarter was very high, too high to be sustainable.
Still there is good news. Unemployment insurance claims this month have been startlingly low compared to historical data.
The weekly leading indicator from ECRI is positive indicating good growth. Recently the Conference Board released data on consumer confidence which is up, as well as a prediction that the economic growth to come will be some of the best in 20 years.
Posted by: Steve at December 30, 2003 04:07 AM