Economic Perspective

With all the conventional wisdom these days being that "the economy" (whatever that means) is in the tank, in a recession, melting down, in a crisis, in a downturn, or any one of a hundred other gloomy or apocalyptic terms, it's hard to get a proper perspective. The consistent drumbeat of the media is having the desired effect, convincing most of us that we are in an economic Armageddon of historic proportions, that of course requires government action of historic audacity. And of course, the effect all this has on most of us is that things must be really bad - even though maybe our own economic well-being is pretty much the same as it was last year or the year before (401k and other investments notwithstanding).

So to help keep some proper perspective on this whole situation, here are some tidbits and numbers borrowed from a current article by George Will.

• Sales the day after Thanksgiving were 3 percent higher than last year. Over the weekend, 172 million people, shopping in stores and online, spent an average of $372.57, a 7.2 percent increase over a year ago, when 147 million shoppers spent $347.55 per person. (Note that is more people shopping, and each spending more dollars.)
• This is a reflection on personal consumption, which normally is 70 percent of economic activity.
• This seems to be evidence of underestimated strength of an economy in which more than 93 percent of those who want to work are employed, and more than 93 percent of mortgages are being paid on time.
• This may be related to the decline of the price of a gallon of regular gasoline from $4.10 in July to $1.81 today. Over a year, every 1 cent decline in the price of gas is a $1.5 billion saving to consumers.

One of the interesting things to me about how people are responding to the economic news is the fact that the personal savings rate - which has been declining for decades to an all-time low - has now begun to rebound. People are spending, to be sure, but they're also being wiser about how and how much they spend, and are saving more. This is undoubtedly a good thing, as it increases the financial stability of individual households. Seems that a lot of people may be reassessing their financial priorities a bit.