In response to Jubak's Journal
I love reading Jim Jubak's journal. I think he has some great points and makes some great arguments. However, I'm going to have to disagree with his most recent entry on the possibility of a recession.
Sure, there's a short-term energy and oil situation that could last for a few months. In his article, Jubak says that since Katrina hit the U.S. energy sector the worst, come winter time, we'll see an economic slowdown. While rising energy costs are a concern, would it be alright to assume that consumers would stop spending? He noted a 1/3 rise in heating costs between last year and the year before. It didn't stop consumer spending. As August's consumer spending numbers tell us: People are still spending! Regardless of the fear of higher gas prices (which have been looming for awhile), regardless of the fear of higher heating costs. If people are so concerned where their Christmas spending money is going to come from, then lower your thermostat a little bit, and bring on the blankets. Save money that way.
However, with the American public already spending more than they save, we have to honestly level with the fact that yes - we are a society of consumers. Jubak seems to suggest that if costs around us are rising, people would be less likely to really push the Christmas retail season. Christmas, whether we're religious or not, has become a national "reason to spend money." And I think that while retail sales have the potential to be not be as impressive as the previous years, it'll still be good enough to keep the economy going.
And plus, let's not forget the fact that a lot of peoples' mentalities are still "Buy now, pay later." Right now, many Americans are already up to their ears in debt. I'm not talking about mortgages and education loans. I mean straight up consumer credit card debt. The savings account interest rate has already been steadily increasing, but it hasn't influenced people to actually save more and spend less. In July, the consumer savings rate was at zero. And then in August, consumer spending actually outpaced saving (saving was at a -0.6% - the lowest level since the government started keeping track in 1959).
I'm sorry Jim. If you think that consumers will suddenly start saving (and not spending) because of higher prices, I have to say:
If banks can offer 3.30% interest in savings accounts, and people aren't already taking advantage of it and beginning to save, than when will they ever have the motivation to start?
Sure, there's a short-term energy and oil situation that could last for a few months. In his article, Jubak says that since Katrina hit the U.S. energy sector the worst, come winter time, we'll see an economic slowdown. While rising energy costs are a concern, would it be alright to assume that consumers would stop spending? He noted a 1/3 rise in heating costs between last year and the year before. It didn't stop consumer spending. As August's consumer spending numbers tell us: People are still spending! Regardless of the fear of higher gas prices (which have been looming for awhile), regardless of the fear of higher heating costs. If people are so concerned where their Christmas spending money is going to come from, then lower your thermostat a little bit, and bring on the blankets. Save money that way.
However, with the American public already spending more than they save, we have to honestly level with the fact that yes - we are a society of consumers. Jubak seems to suggest that if costs around us are rising, people would be less likely to really push the Christmas retail season. Christmas, whether we're religious or not, has become a national "reason to spend money." And I think that while retail sales have the potential to be not be as impressive as the previous years, it'll still be good enough to keep the economy going.
And plus, let's not forget the fact that a lot of peoples' mentalities are still "Buy now, pay later." Right now, many Americans are already up to their ears in debt. I'm not talking about mortgages and education loans. I mean straight up consumer credit card debt. The savings account interest rate has already been steadily increasing, but it hasn't influenced people to actually save more and spend less. In July, the consumer savings rate was at zero. And then in August, consumer spending actually outpaced saving (saving was at a -0.6% - the lowest level since the government started keeping track in 1959).
I'm sorry Jim. If you think that consumers will suddenly start saving (and not spending) because of higher prices, I have to say:
If banks can offer 3.30% interest in savings accounts, and people aren't already taking advantage of it and beginning to save, than when will they ever have the motivation to start?
posted by L.Su at 4:08 PM
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