I participated in a discussion in today’s WSJ’s (the free Econoblog) on consumer spending, titled Shopped Out? My cohort in this was Dartmouth College Professor Andrew A. Samwick, author of Vox Baby. Andrew served as the chief economist
on the staff of the President’s Council of Economic Advisers in 2003 and 2004.
Its an explanation of why the consumer is almost — but not quite — tapped out, and the repurcussions of that.
Here’s the intro:
For at least the past decade, anyone who has bet against the resiliency and
unending spending capacity of the U.S. consumer has decidedly lost the wager.
Even through the recession of 2000-01, they hardly slowed their profligate ways.
Sept. 11 managed to create a pause in spending — at least for a short time —
but it was more than made up for in the ensuing quarters. Indeed, the careers of
economists who have declared the U.S. consumer to be tapped out litter the
countryside like corpses after a war.
There are early signs, however, that taking the other side of this bet is no
longer a sure thing. We see a variety of factors suggesting that the consumer,
while not yet exhausted, is slowly but surely moving in that direction. While
it’s premature to declare the American consumer "shopped out," I suspect it’s
now quite late in the cycle. Barring a significant improvement in economic
fortunes, including robust job creation and increased personal income levels,
that exhaustion now looks inevitable.
It was a lot of fun doing this with someone the stature of Professor Samwick. I definitely learned a few things . . .
UPDATE September 6, 2005 6:30 am
To answer a recurrent comment and email about this: It was written Sunday and Monday, before Katrina made landflall, the levees broke and the magnitude of the disaster was known or understood. The impact of the storm (see this) only exascerbates a deteriorating situation.
Barry Ritholtz, Andrew A. Samwick
WSJ’s ECONOBLOG August 31, 2005