The Economist: Random thoughts on past events
I spent the month of January ruthlessly cleaning out 35 years worth of files. Economists are notorious packrats, and I’m no exception.
Among other things, I found a file of speeches going back to 1989. (I’ve been making speeches on the economy since around 1979, so I guess I cleaned files once in the past.) The earliest speech I had saved, from July 1989, said there would be a recession in 1990. Not a bad call; it began in July 1990 and ended in March 1991.
In December 1989, I wrote about six issues facing Colorado. I had just visited the Soviet Union. Perestroika was well under way — Gorbachev had told us that the USSR was no longer the enemy – and I speculated we would soon be able to cut back on defense spending and enter new consumer markets. The Soviet Union was dissolved in December 1991, and defense spending did fall for a few years, but it soon surpassed its 1989 level, even after adjustment for inflation. I also listed lack of confidence in political leadership, the danger of protectionism and the need for more spending on higher education as things that should concern us. How little has changed!
A folder of articles from 2009 provided a reminder that, even though the economy is plodding and unemployment remains high, things are a lot better than they were two years ago. Take, for example, the headlines from that January.
“U.S. suffers worst year of job cuts since 1945”
(We lost half a million jobs in December 2008 alone!)
“Fastest fall on record in U.S. retail sales”
(December 2008 was 9.8 percent below December 2007!)
“U.S. housing prices tumble to new low”
(The stricken market showed no sign of bottoming out; consumer confidence continued to sink!)
The good news is that there were 31,000 more Coloradans working at the end of 2011 than there were two years earlier. The bad news is that we were still 116,600 jobs below our all-time high in April 2008.
Despite the job picture, consumer confidence rose through the last nine months of 2011. We made progress on paying down our debt and increasing our saving. Consumers’ revolving credit, which is primarily credit-card debt, peaked at $957.5 billion in 2008 and was down to $792 billion in the third quarter of 2011. The saving rate, which ranged from 7 percent to 10 percent from the 1950s through most of the 1980s, fell to 1.5 percent in 2005. We built it back up above 5 percent from 2008-2010.
But we are still shopping. In 2011 retail sales were 7.7 percent above 2010 and 14.6 percent above 2009. If the number of enormous flat-screen TVs I saw being carried out of Costco in December was any indication, people feel it is time for a bit of pampering.
It should be no surprise that the saving rate slipped to 4.4 percent last year. Despite its 40 years of post-war stability, it has varied enormously since data began being collected in 1929. It was actually negative during the Great Depression: -1.1 percent in 1932 and -1.7 percent in 1933. That was long before credit cards and home-equity loans were available. During World War II, when many consumer goods were hard to come by, it averaged 26 percent in 1943 and 1944.
The other thing that my orgy of cleaning made me aware of is how reliant I once was on paper. That’s why I saved everything – newspaper articles, forecasts, data series that were mailed to me by government agencies or purchased from private providers. As I fill up the recycle bins I offer up a quick prayer that the great computer in the sky doesn’t someday crash and wipe out what now exists only in cyberspace. If that happens, I hope there is some economist out there who didn’t get around to cleaning out her files.