The Economic Status: Ascending from Rock Bottom
Monday, October 5, 2009
American consumers are worried: They want to know whether their economy is improving, worsening or unchanging. Ben Liebman, Ph.D., associate professor of economics at Saint Joseph’s University in Philadelphia, says economists will look to holiday spending to gauge the economy’s health.
“For retailers, it’s where they make more than half of the year’s profits,” Liebman says. “Unfortunately, the most recent consumer confidence data was surprisingly negative, which does not bode well for the holiday season. This is especially worrisome for the retail sector.”.
Retail sales experienced growth in August, but Liebman says this stemmed in part from the ‘Cash for Clunkers’ program. Non-auto sales actually fell in August, he says.
Still, it appears we’re no longer in a recession, Liebman notes. “What the ‘end’ of recession implies is that we’ve hit the bottom of the decline in the economy, and now, things will start to improve.”
Leibman says overall, even with an unemployment rate of 9.7 percent there are indicators of improvement. “One very good sign is that industrial output has been increasing.”
We may be in poor shape for a while, though, Liebman adds. “There are continued layoffs in the manufacturing sector, and the housing market continues to have a negative impact.” Likewise, unemployment may take a while to recover.
“As people become more optimistic about finding a job, folks who had stopped looking for a job — and were thus not counted as part of the unemployed — may start to seek employment again. This could then cause the unemployment rate to rise further,” Liebman says.
According to Liebman, overall, consumers, concerned about their jobs, are looking for sales and other incentives to spend. “The question is, how much room do retailers have to offer such incentives? It’s much tougher when you don’t have the government providing the incentives, like with ‘Cash for Clunkers.’”