Is the consumer still spending?

Michael Mandel, chief economist BusinessWeek, believes that another drop in the market is yet to come because of a broad decline in consumer spending. The recession in the US started in November 2007 with a decline in private sector employment that has shed some 300000 jobs so far. Personal consumption is holding up still positive, but only because of "quirky statistics". The government's "personal consumption" includes outlays for Medicare, Medicaid, and private health insurance to about $1.8 trillion out of $10 trillion total. It also includes "imputed" item such as $1.1 trillion owner-occupied rent which is a theoretical payment of rent (not real rent). Without these categories, which are not coming out of the pockets of consumers, inflation adjusted personal spending has actually fallen since November. The decline is pretty much across the board. (see table "Where the Money is Going" here).

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Domestic auto sales for April came in very weak with sales among the Big 3 down between 10 and 20%. Drew Matus from Lehmann Brothers expects nonfarm payrolls to be down 90k in April.


source: The Consumer Spending Mirage
by Michael Mandel, chielf economist BusinessWeek
http://www.businessweek.com/magazine/content/08_16/b4080000602263.htm