Retail sales were better than expected in December, and analysts are waxing cautiously optimistic:
“There is the hope that the momentum is going to continue and the good news will feed on itself,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, who correctly projected the rise in retail sales. “Better spending will lead to more jobs and more jobs will lead to more spending.”
I hope he’s right. The economy does seem to be easing back into a slightly more normal pattern of jobs and growth (at least, as long as we think that the dismal December jobs report was a fluke, rather than a harbinger of worse to come). But it still faces a big test: Can people who survived the Great Recession shed the fear they acquired during those wretched years?
The people who survived the Great Depression, particularly its early years, bore permanent scars. There were labor market scars -- then, as now, being out of work for a long time was not good for your long-term earnings prospects. And there were psychological scars. My grandfather used to hide money in the house in case the banks closed, to the point where my grandmother found $10,000 stashed in a teapot she was about to donate to the church jumble sale. (Thank heavens she decided to clean it first!) U.S. household savings rates began to decline just as the last children of the Great Depression began to retire and let the baby boomers take over, and while a lot of factors contributed to that, struggling through the Great Depression may have made those generations more conservative in their financial habits.
To be sure, we had a boom after World War II. But that boom followed almost two decades of suppressed consumption and a labor crunch during the war that had driven down unemployment to effectively nothing. People had stacks of money saved from war work and war bond purchases, and soldiers getting demobilized had the GI Bill. We’re unlikely to repeat that phenomenon.
A lot of things need to happen for us to return to economic health. One of them is for people to feel like a better future is possible, even likely. Right now, I’m more likely to hear people projecting a future that looks like the endless grinding insecurity of the present. Let’s hope the people I read, and interview, are not a representative sample.