In defense of their rosy outlook, some bulls contend that because "staples" (e.g., food, health care) account for such a large share of overall consumer spending, their impact on the economy is not as large as some statistics might suggest. In response, I offer the following snippet from the "I couldn't have said it any better department," courtesy of Some Assembly Required:
Not On My Block: How much of the consumer spending that makes up 70% of US GDP is discretionary? One way of looking at is to subtract out “housing, healthcare, energy, food eaten at home and other household staples.” and concludes that only 20% of the GDP can be affected by consumer sentiment. This overlooks the rise in homelessness, moving back in with mom and dad, keeping the old car, skipping dental care and doctor's visits, having the heat turned off, and turning to food stamps and community pantries for food assistance – all of which eat into the non-discretionary half of GDP.
Similarly, to those who suggest that the declines in weekly initial and continuing jobless claims are a sign that the employment situation is rapidly improving, I present a "more to the story" tidbit from Zero Hedge:
The number you won't hear mentioned anywhere in the Mainstream Media: 327,729. That is how many people shifted to Emergency Unemployment Compensation programs in the last week alone, hitting an all time record high of 4.2 million! So as everyone is focused on the benign picture of initial claims in the last week which was "only" 474,000, the number of people rolling off continuing benefits has exploded and is now a stunning 592,579 only in the last two week. Look for this number to keep going into the stratosphere as the 6 month continuing claims cliff keeps getting hit by more and more people who are unemployed and keep looking not only for believable change, but actual jobs to go with it.
Anyone who denies there is major problem must be living in a dream world. Once your unemployed no one cares like I said in my other post. Good blog.
Posted by: Matt | December 11, 2009 at 09:28 AM
There is indeed a major problem. This will rise in scope as we coast into January, 2010. That will bring around the "Retail" element, already in huge distress. People are choking up their wallets during the holiday shopping season, the season which keeps retail alive. Retail, who cuts to skin and bones anyway, even without a recession, will drop like a picked up hot horseshoe in January, with them cutting even the manager of the store this time. "Leave the keys on the desk, and turn down the thermostat to 60, and all the lights off but the security ones" will be heard in quite a few phone calls from Corporate Office to local Management starting say about January 2nd.
Many car wheeler/dealers will close those mega auto malls in 2010. Cash for clunkers did not make the cut. Fumbling government paperwork has still not provided the money dealers were out in that operation. It has bankrupted lots of dealers. The banks will no longer go with them to insure their survival.
A combination of the stormy cold weather and total slowdown of all phases of the economy as we enter the new year, will bring extreme fear and frustration to homedebtors as their jobs fizzle away, and their McMansion payments get harder and harder to make. This phase is on top of the already high rates of foreclosure.
The good news? CNN/FOX/ABC/CBS/NBC will still carry "American Idol" next spring,(less Paula) and also Survivor (which may increase in audiance as the word "survival" will become a buzz word in 2010). Also we will be undulated with 24/7 news of the "doings" of Tiger Woods and company. A "nine" iron will bust a head right open, wielded by a scorned blond woman.
Merry Christmas and A Happy New Year!!!!!
Posted by: HSpencer | December 11, 2009 at 11:14 AM