Saturday, August 6, 2011

Economy: In Consumers We Trust VII

Oh, what a week! The stock markets tanked and the U.S. debt got downgraded by Standard & Poor`s. But the U.S. consumers had a good week. Really!

American employers added more jobs than forecast in July and wages climbed, reported Bloomberg yesterday. Payrolls rose by 117,000 employes, the jobless rate dropped to 9.1%. Average hourly earnings climbed 0.4%. No sign of recession yet.

But the best news came from the financial markets. Last week the price for oil plummet 9% to $86, in April oil cost on the financial markets $114, around 30% more! Other commodities also got cheaper.  A big relief for the consumers.

Both developments improve the financial situation for the consumers. They got more jobs and higher wages on average and they have to spend less for energy & food now. Both developments are filling their wallets and should beef up the retail sales in the coming weeks when the important back-to-school season begins. A stronger growth of the consumer expenditures should rekindle the staggering economy and prevent a recession.

This situation is very different from 2008 (drivebycuriosity). Then the price for oil exploded to $147, other commodities also got more expensive, even though the recession had already started then. Then the high commodity prices made the situation worse. The high expenses for gas, heating oil & food forced many consumers to cut spending for other goods, even for their mortgages. Now falling commodity prices in combination with a healing job market are helping the economy.

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