CONSUMERS DON’T LIVE BY DATA POINTS
Scottish historian Thomas Carlyle is credited with describing economics as “the dismal science.” But in the current climate, it’s some economists who are upbeat and plenty of consumers with a dismal outlook.
There’s a disconnect between their data and our daily lives.
“I am confident that our recovery remains strong and is even quite remarkable,” Treasury Secretary Janet Yellen testified before the Senate Banking Committee on Tuesday.
“The typical American is better off today than in February 2020 and that is nothing short of a miracle,” Betsey Stevenson, professor of economics and public policy at the University of Michigan, tweeted on Nov. 24.
“The economy is great, but voters don’t believe it,” financial writer Felix Salmon and political writer Hans Nichols wrote for Axios on Nov. 9. They listed a series of financial gains, from job growth to stock market highs and rising household wealth.
Nonetheless, a Harris poll in October showed 68% of respondents felt their personal financial situations were the same or getting worse. (Seventy-seven percent of global respondents felt the same way.)
Jerome Powell, renominated as Federal Reserve chair last week, said “challenges and opportunities” come with the “unprecedented reopening of the economy.”
I’m going with “challenges.” Almost two years after the first COVID-19 case was detected, the pandemic is still upending expectations, now with the omicron variant’s emergence.
It is affecting what people buy, according to a study of more than 7,000 people worldwide by Alix Partners, a global consulting firm. The pandemic’s impact has created what the study calls “the intentional consumer.”
Millions of people have reassessed their spending habits, says David Garfield, global leader of Alix’s consumer products practice. He sees “two different currents” emerging along socio-economic lines.
Higher-end consumers have cut out some purchases because they aren’t essential or don’t fit with their paredback lifestyles. Lower-income shoppers aren’t spending because they can’t afford what they once could, whether from job losses or lost income. Or, now, inflation.
Even when the turbulence dies down, Garfield says, “some will snap back, and some won’t.”
The pandemic’s economic ramifications could be long-lasting. Like millions of people who lived through the Depression, my parents developed a sense of thriftiness they never lost. My father, throughout his life, reflexively turned out lights in empty rooms; my mother declined invitations to Tupperware parties, preferring to reuse Imperial margarine plastic tubs.
Today, Americans see evidence of the turbulent economy wherever they turn. Here in Ann Arbor, Mich., gas prices have jumped this fall at Speedway. The Starbucks is now operating only from 8 a.m. to 3 p.m. and sometimes shuts all day without notice.
And this is in Washtenaw County, where 76.2% of adults age 16 and older have received at least one dose of coronavirus vaccine.
Those shots, which were supposed to return life to normal, haven’t been the magic potion many expected.
This is especially tough on restaurant owners. Since opening Side Biscuit, his Ann Arbor wings shop in March, Jordan Balduf has endured numerous price increases, in some cases by 1,000%, he says. Orders he places for food and paper goods sometimes arrive half-filled, sending him running to local stores to supplement deliveries.
Cafe owner Jenny Song has encountered similar headaches. She raised prices on the menu at one Songbird cafe last summer, reduced store hours and indefinitely closed her other cafe.
It’s tempting to hope that, as with the 1918 flu pandemic leading into the Roaring Twenties, this scourge will be followed by an economic boom. But if the Depression experience of Americans such as my parents is any indication, we could be feeling COVID-19’s psychological aftermath for years, even decades, to come.
Economists shouldn’t be in too great a rush to call the recovery. Our comfort level, not their data, will determine that.