Black Friday 2011: Consumers aren't lacking in confidence. They lack cash.
Per person demand for domestically produced goods and services remains 7 percent lower than before the recession, 8.5 percent lower than what we’d see under normal growth. Consumer spending data from the Bureau of Labor Statistics reveals that lower income families are pinching their pennies.
Since 2006 families with incomes of about $10,000 have cut their spending on fresh food, clothing, household goods, and transportation dramatically. Families bringing in closer to $30,000 have cut back too, and not just on luxuries: 25 percent less spent on beef, 23 percent less on meals away from home, 48 percent less on sheets and towels for their homes, and their young children are going to school with as much as 33 percent fewer new clothes.
Many of these families just don’t have the financial stability to handle holiday shopping this year.
That has a ripple effect, which fuels a vicious cycle. A Wall Street Journal survey of economists showed that 65 percent cited lack of demand as the primary impediment to increased hiring.
An October survey of small businesspeople found that 28 percent of owners reported that poor sales is still their top business problem, and nearly a fourth of respondents didn’t see the situation improving in the next six months. No demand means businesses don’t hire; fewer jobs and paychecks lead to less consumer demand.
The solution is clear (if broad). We need to slow foreclosures and restore the value of our houses, create jobs to re-employ the 24 million people who are currently un- and under-employed, and allow our young people to attain education without mortgaging their futures.