Radio commentary, April 15, 2010
Recession fatigue (cont.)
I said last week that the preliminary reports on March shopping showed Americans rediscovering their lust to buy, following almost two years of born-again prudence. Those early returns, which were based on sales numbers coming from the major chain stores, have now been confirmed by the official word from the Census Bureau, compiler of the monthly retail sales figures. The Census stats are based on a much broader survey of the retail universe, which includes not only big national names like Target and Wet Seal, but also local chains, Mike’s Main Street Housewares, online retailers, and even museum gift shops. And the Census Bureau tells us that sales rose a strong 1.6% in March—or 0.6% if you leave out autos, which had a very good month. Total sales were up 7.6% from a year earlier—or 6.4% excluding autos. This is a very substantial recovery. It may not be sustainable—on which more in a sec—but for now it looks like Americans have now had enough of austerity.
One reason I wonder how sustainable this is is because I can’t figure out where the money is coming from. The job market, while picking up, is still quite weak, and it looks like people continued paying off more on their credit cards than they took out in new credits in March. So if it’s not fattening paychecks or bigger VISA balances that’s funding this little binge, what is it?
Here’s one possibility. I post these opening commentaries to a blog [i.e., here]. When I asked this question last week, after mulling over the preliminary shopping reports, a reader offered this comment: “Regarding the rebound of consumer spending from my own experience — I spent most of 2009 worried about getting laid off and subsequently saving every penny I could. After it became clear that I wasn’t going to get laid off, I let out a little pent-up demand. I suspect that that a lot of still-employed people did the same — redirecting some would-be savings toward spending.” Could be. The savings rate rose, though not as much as it might have, throughout 2009. Let’s see if it starts heading down again.
And then there are rich folks. In the chain store survey, published I should say by the International Council of Shopping Centers, purveyors of luxury goods had been clocking higher-than average gains since last December. They widened their lead in March. That may be a function both of really rich people opening up their wallets further and the would-be rich indulging their aspirations.
Further evidence of economic recovery: the Naitonal Association of Homebuilders’ monthly survey of builder sentiment put in a sharp rise in April, exceeding expectations. All its components—current sales, expected future sales, and foot traffic from prospective buyers—gained. The index is still deep in the basement, and its latest gain just takes it back to where it was last fall, but this is some of the best news coming out of the housing market in ages. We’ve never had an economic recovery without a housing recovery, so it would be nice if this prerequisite finally fell into place.
But not such good news coming out of the job market. There’s much debate over whether the rather strong gain in employment in March was a fluke, or the beginning of a new trend. My guess is that the job market is starting to turn around, but it won’t be a smooth or particularly happy path. One disappointing piece of evidence was released on Thursday morning—the weekly jobless claims numbers, filed by people who’ve just lost their jobs and signed up for unemployment benefits. Those rose last week by a surprising 24,000, the second consecutive weekly increase. These numbers are volatile—for example, it’s not easy to adjust for the effects of the Easter holiday. But even if you take the four-week average, which smooths out the volatility, there was also a second consecutive increase—though much smaller in magnitude. I don’t think this is a sign that the labor market is starting to fall apart again—but it is a sign that this won’t be an easy road to recovery.
Finally, in honor of April 15, a few words on some work by the excellent folks at Citizens for Tax Justice. The Tea Partiers are all in a rage by the alleged tax increases imposed by Obama and the Democrats. Aand they’re not the only ones, since over half of Americans think that taxes have gone up over the past year. The truth is exactly the opposite: as CTJ points out, the current regime has cut taxes for 98% of working families and individuals—by an average of $1,158. For a change, those in the top 1% are not the biggest beneficiaries. Fewer than 1 in 3 of them got any cut at all, and their cut was smaller in dollar terms than the next 19% of the income distribution. The tax cuts were skewed towards the middle and bottom of the income distribution. Why does almost no one know that?
Speaking of the Tea Partiers, a couple of polls out this week (one, two) confirm what we already knew: TP activists, meaning people who’ve gone to rallies or donated money, tend to be whiter, righter, better off, more pious, and more male than the rest of the population. One of the things that set them off: they think that Obama is taking their money and giving it to the poor and the black. As we know, he’s not. Theirs is a resentment of the privileged, not an expression of working class anger. In other words, they’re not the good guys, or even reachable by the good guys, as some folks on the left have suggested.