This may seem like a strange question as everywhere you look you here talk about the worst crisis since the Great Depression and there are still many prognosticators acting like we should be stocking up on canned goods. Yes, we have had a dramatic drop in housing prices and equity prices and many, many people feel poorer than they used to. Further the unemployment rate has nearly doubled with particular hits in the areas of Manufacturing and Construction as everybody sold off inventory into weak demand. We have some significant disruptions in California where the populace and the Government are unable to agree on ways to balance the State budget and many other states are faced with drastic budget problems.
Now, I've lived through a fair number of recessions and maybe, just maybe, I'm in an area that hasn't been as hard hit as others, but as I drive around I don't see that many for sale signs on houses, I don't see boarded up stores and pretty much everyone around me is still working. Summer jobs for the teenagers seem to be rare this year, so I guess they are sort of suffering. Now, I don't want to minimise the pain in Michigan and California, and yes, a common topic this year is how much the house values have dropped vs the last few years where the topic was how much they were going up, but its the same people having these discussions, drinking pretty much the same cocktails and maybe eating store brand snacks instead of brand name ones at the summer cookouts.
Now, I got a letter the other day from Bank of America telling me they were reducing my credit line from $20,000 to $10,000 on a credit card I haven't used in about a year. I don't normally run credit card balances but I have to admit that I am running one right now on a card that gave me zero percent interest until October on a balance transfer. I was wondering if this had impacted my credit score but then decided I didn't really care, and filed the letter from BOA away.
I still get tons of zero balance transfer offers weekly, normally including a 3% transaction fee. I went to an outlet center and everything is marked down 30-40-50% or more it seems so I picked up a few items for my grandchildren at Justice at 40% off. Seemed to be quite a few shoppers browsing the sales, but of course I don't know how many actually bought anything.
So far, the main impact of the recession on me had been the mutual funds I hold which lost a lot of value last year but have regained about half of it so far this year. I did reallocate my main fund to be a bit more conservative when I felt this correction was starting and will reverse that when the bull market resumes in the fall.
Also, there are simply some wonderful stock bargains out there if you take a long term perspective. Much like the reduced prices I now pay for clothes and gifts as well as pretty much everything, stocks are also cheap. I sort of feel that some people are going to miss the sales and end up paying full retail, but I guess that's just the way it goes.
One of the things I notice and this is probably causing the teen job shortage is that more and more stores have reduced costs by going to self checkout. I actually prefer this since its sort of a fun activity using the scanner and figuring out how to get the coupons to register, but while there is usually someone there to reduce theft and help out customers, it seems that where there used to be four to six checkout lanes, you now can have just one person. Home Depot has this system also, but haven't seen it at the clothing stores yet. Don't have a convenient Lowe's near me so not sure about them.
The other thing is how much shopping I now do on-line. Trips to the mall often are excursions that give you a chance to walk around and see what you like, and yes, some purchases are made. However, more and more, the effort of finding the right size at the mall vs the ease of simply looking up the item on-line and ordering it, often with free shipping and sometimes with no tax, is getting very commonplace in my household. I don't think this bodes well for mall operators in the long run, although if they provide enough entertainment options, they still may draw browsers.
I would think the growth in on-line media and shopping is going to cause a decrease in jobs as the number of brick and mortar stores and the amount of print media decreases. On-line stores just don't require sales clerks. In addition, as magazines and newspapers lose off line circulation, the competition on-line is going to become fierce and I think many reporters and other media types will have to compete individually instead of as paid employees. They may find themselves becoming the next "auto workers".
I realize I've drifted off topic, but since I mostly write this to record my thoughts, and as far as I know I'm the only one reading it, I'm OK with that.
So, how bad is the recession? Like every recession it depends on how badly it has impacted you. Even in good times people have individual recessions. Obviously more people have them in bad times. If you lost your home and/or lost your job it may be pretty terrible indeed. Of course one aspect of recessions is that you actually don't feel as bad when the press says you are not alone and therefore not responsible. When you lose your job or home in good times, you feel really terrible, since everyone else seems to be doing great. If you are suffering now, you at least have lots of company.
In all honesty, the recession in the late 70s felt a lot worse to me than this one does. Now I've acquired a lot of assets since then and the country that was going to replace the US as the major economic power has shifted from Japan to China, but I knew a lot more people who couldn't find jobs back then. One factor was the job market was flooded with baby boomers who were just starting out. Now as the baby boomer are getting ready to leave the job market, some are being forced to leave early and some are being forced to hang on and work longer. Times may be tough for new graduates but there are proportionately a lot less of them then there were in the 70s. One of the strategies back then was to stay in school and get a graduate degree, and that postponement certainly helped ease the problem. Another problem in the 70s is that homes were just as unaffordable as they are now relatively speaking and interest rates were horrible. Young people who can secure employment, have a much better shot at affording a home now.
Well, I call this just thoughts, and that's exactly what it is. I think the recession is basically over and by Christmas we will be doing pretty good. Some jobs are gone forever and real estate isn't going to jump to 2007 levels but unemployment will start to decrease and everyone will simply feel better.
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