Posted at 9:16 AM on November 28, 2011
by Paul Tosto
Filed under: Economy
Black Friday weekend was great for retailers. Today's Cyber Monday promotions are reportedly going well and the stock markets this morning are giddy that American consumers are spending like we aren't still trying to recover from the worst recession in decades.
Before we're completely trampled in the buying frenzy, though, it's worth stopping to ask: Isn't the spend-first mindset what helped make the Great Recession so awful?
Just before the recession, the U.S. personal savings rate -- the dollars we save as a percentage of our disposable personal income -- was at a 50 year low. We didn't learn the lessons of our parents and grandparents that eventually something bad happens in the economy and you need to have money saved.
Huge job losses and a historical drop in home values killed our incomes and the savings we had built up in our homes.
In response, Americans started saving like crazy and paying down debt, which was great unless you were trying to sell stuff. Personal consumption spending accounts for more than two-thirds of U.S. gross domestic product.
So now we're back to buying, not saving. Job creation, though, remains weak in Minnesota and across the nation. Home values here are stabilizing but not still close to pre-recession levels.
Source: Minneapolis Area Association of Realtors
So and the risk of sounding like a buzzkill, the good times over the weekend and through today in retail seem worrisome to me.
On the positive side, Americans seemed to have learned a lesson about borrowing heavily to pay for their spending. Debt payments as a percentage of disposable income plunged in the recession and haven't jumped back yet.
That graph though runs through April 2011 and doesn't count what Americans have been doing the past few days.