It’s Official: The Consumer (And The Economy) Is Alive and Dead

Wolf Richter's picture

Wolf Richter

Friday’s plunge in consumer sentiment—from 82.7 during the post-election glory days to 74.5—was hastily ascribed to the Fiscal Cliff which, much like Sandy, is recruited to explain everything that doesn’t go according to plan. And a lot hasn’t gone according to plan.

On Thursday, it was the Gallup/Wells Fargo survey of small-business owners that had thrown a monkey wrench into the hope machinery. Small-business owners are generally an optimistic bunch, and they’re key job creators. But they suddenly decimated their hiring plans to the record low set in November 2008, the catastrophic post-Lehman days. Back then, it was followed by massive and brutally rapid layoffs.

“An eye-opening drop in optimism,” mused Marc Bernstein, head of Small Business for Wells Fargo.

Consumers have been giving mixed signals. For example, the Restaurant Performance Index, released on November 30, fell in October for the second month in a row and hit 99.5, the lowest level in 14 months. It was the first time during that period that it dropped below 100, indicating contraction.

Then on Friday, Gallup’s consumer spending report was a bit lumpy. At $73 in self-reported daily spending, it was flat in November compared to the prior two months, and down from a post-crisis high of $77 in August. Still, it was up two bucks from last year. Ominous sign: those making more than $90,000 a year throttled back their spending to $113, the worst November since 2008. Spending by lower income Americans, who have to shell out just about everything they earn to keep their chin above water, remained stagnant. But, but... spending picked up around Black Friday and Cyber Monday and is tracking higher in early December.

Hours later, the Fed’s Consumer Credit report, a stalwart indicator of how much consumers are borrowing to prop up the economy, shed more light on our strung-out heroes. Not seasonally adjusted, consumer credit increased by $10.3 billion in October, the third month in a row of increases, raising hopes in some quarters that the unemployed, the underemployed, and those working for wages that haven’t kept up with inflation would somehow summersault over their income hole by borrowing from the future—a strategy that has been a key driver of economic growth in the US, and that has hit a wall during the Great Recession.

But credit cards and other forms of revolving credit edged up only $1.4 billion, after a swoon in September. What did jump was non-revolving credit. By $8.9 billion. Alas, almost $7 billion of it was student loan debt held by the government. Consumers aren’t splurging. They’re borrowing to pay for essentials. And for education.

But wasn’t there a shining example of the growing strength of the economy? Indeed: the jobs report’s soothing numbers. Unemployment dropped to 7.7% and 146,000 jobs were created, despite Sandy! It inspired the usual mix of derision and controversy. But its sausage-like innards and self-contradictions include the fairly reliable Employment-Population ratio that had deteriorated to 58.7%. It had dropped into that range in late 2009, for the first time since 1983, from a peak of 64.7% in April, 2000. The stagnating ratio confirms that barely enough jobs have been created since 2009 to keep up with the growth of the working-age population. And now, it has taken a turn for the worse [Has unemployment become a cultural thing? Read...  Making Heroes of Those Who Slash Jobs].

The BLS headline numbers slammed into another vision of realty, released the day before. Gallup’s unemployment rate leapt from 7.4% to 8.3%—though it’s still lower than it was in November last year. Underemployment shot to 17.2% from October’s post-crisis low of 15.9%. A nasty reverse, after months of uneven improvements.

Gallup’s own Payroll-to-Population rate—the percentage of the adult population who are employed by an employer, not self-employed, for at least 30 hours per week—took the sharpest nosedive since the data series began in 2010, down two percentage points, hitting 43.7% in November.

Sandy’s fault? Not so fast, Gallup says. The Payroll to Population rate “declined across all regions, and the East had the smallest October to November decline, while the Midwest saw the biggest decline.”

More sobering still: The size of the workforce—those working plus those actively looking for a job—skidded in November to 67.2% from 68.3% in October and is now lower than it had been in November 2011 (67.7%). “When Americans drop out of the workforce, as happened in November, it masks a decline in jobs,” Gallup explained. Hence, also the BLS’s rosy unemployment number.

This is the background to the staged posturing, tragic-funny theatrics, and lurid special effects in Washington about the Fiscal Cliff—and whether to fall off, jump off, fly off, dive off, climb down, or somehow avoid it altogether. It has become an inescapable media zoo, much like Y2K once was. I remember well the worldwide letdown on January 1, 2000. Read.... The Majestic US Debt.

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DavosSherman's picture

& On scumbag Greenspan:

Greenspan who was hired by S&L thief Charles Keating who bribed 5 senators cost the government (us) $3 billion and defrauded 23,000 Lincoln bondholders (most everyone of them lost their life savings).  Keating hired Greenspan and gave him $40,000 to walk around DC and tell politicians what an outstanding guy Keating was.  Ronnie Reagan was soooooo impressed with him that he tapped Greenspan to head up the Fed.

Greenspan had NYU hide his dissertation, and if you read his work you’ll find out that he figured out homeowners were refinancing their homes for larger amounts thatn their originial mortgages and spending the excess cash on goods and services.

Now what you have to wrap your mind around here is that this was a time when Seconds and HELOCs were unheard of.

He wrote: “There is no perpetual motion machine which generates an ever-rising path for the prices of homes.” …”break in prices of existing homes would pull down the prices of new homes to the level of construction costs or below, inducing a sharp contraction in building.”

Sigep0612's picture

In 1988..Barney Frank said every American was entitled to the American Dream.  In 1999, Glass Stegall was abolished and lax mortgage rules were put in place. Viola...2008.   In August 1993, Hillary Clinton said that all Americans are entitled to "Universal Health Care."   Viola...ACA 2011.    In 1995, a group of Lawyers said that Marijuana should be legalized and Gays should have national equal rights.   What are you now hearing about now in the news?   Rumblings are now circulating about 20% of a person's 401-K should be invested in US Treasury instruments.   Where do you think that's headed.  Is there any reason to wonder why more and more Americans are getting fed up.   

DavosSherman's picture

On the IRAs/401Ks $6 Trillion of Low Hanging Fruit for the desperados:

DavosSherman's picture

& here

November 04, 2008

RALEIGH — Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration.

Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.

The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.

Rep. George Miller, D-Calif., chairman of the House Committee on Education and Labor, in prepared remarks for the hearing on “The Impact of the Financial Crisis on Workers’ Retirement Security,” blamed Wall Street for the financial crisis and said his committee will “strengthen and protect Americans’ 401(k)s, pensions, and other retirement plans” and the “Democratic Congress will continue to conduct this much-needed oversight on behalf of the American people.”

Currently, 401(k) plans allow Americans to invest pretax money and their employers match up to a defined percentage, which not only increases workers’ retirement savings but also reduces their annual income tax. The balances are fully inheritable, subject to income tax, meaning workers pass on their wealth to their heirs, unlike Social Security. Even when they leave an employer and go to one that doesn’t offer a 401(k) or pension, workers can transfer their balances to a qualified IRA.

Mandating Equality

Ghilarducci’s plan first appeared in a paper for the Economic Policy Institute: Agenda for Shared Prosperity on Nov. 20, 2007, in which she said GRAs will rescue the flawed American retirement income system (

The current retirement system, Ghilarducci said, “exacerbates income and wealth inequalities” because tax breaks for voluntary retirement accounts are “skewed to the wealthy because it is easier for them to save, and because they receive bigger tax breaks when they do.”

Lauding GRAs as a way to effectively increase retirement savings, Ghilarducci wrote that savings incentives are unequal for rich and poor families because tax deferrals “provide a much larger ‘carrot’ to wealthy families than to middle-class families — and none whatsoever for families too poor to owe taxes.”

GRAs would guarantee a fixed 3 percent annual rate of return, although later in her article Ghilarducci explained that participants would not “earn a 3% real return in perpetuity.” In place of tax breaks workers now receive for contributions and thus a lower tax rate, workers would receive $600 annually from the government, inflation-adjusted. For low-income workers whose annual contributions are less than $600, the government would deposit whatever amount it would take to equal the minimum $600 for all participants.

In a radio interview with Kirby Wilbur in Seattle on Oct. 27, 2008, Ghilarducci explained that her proposal doesn’t eliminate the tax breaks, rather, “I’m just rearranging the tax breaks that are available now for 401(k)s and spreading — spreading the wealth.”

All workers would have 5 percent of their annual pay deducted from their paychecks and deposited to the GRA. They would still be paying Social Security and Medicare taxes, as would the employers. The GRA contribution would be shared equally by the worker and the employee. Employers no longer would be able to write off their contributions. Any capital gains would be taxable year-on-year.

Analysts point to another disturbing part of the plan. With a GRA, workers could bequeath only half of their account balances to their heirs, unlike full balances from existing 401(k) and IRA accounts. For workers who die after retiring, they could bequeath just their own contributions plus the interest but minus any benefits received and minus the employer contributions.

Another justification for Ghilarducci’s plan is to eliminate investment risk. In her testimony, Ghilarducci said, “humans often lack the foresight, discipline, and investing skills required to sustain a savings plan.” She cited the 2004 HSBC global survey on the Future of Retirement, in which she claimed that “a third of Americans wanted the government to force them to save more for retirement.”

What the survey actually reported was that 33 percent of Americans wanted the government to “enforce additional private savings,” a vastly different meaning than mandatory government-run savings. Of the four potential sources of retirement support, which were government, employer, family, and self, the majority of Americans said “self” was the most important contributor, followed by “government.” When broken out by family income, low-income U.S. households said the “government” was the most important retirement support, whereas high-income families ranked “government” last and “self” first (

On Oct. 22, The Wall Street Journal reported that the Argentinean government had seized all private pension and retirement accounts to fund government programs and to address a ballooning deficit. Fearing an economic collapse, foreign investors quickly pulled out, forcing the Argentinean stock market to shut down several times. More than 10 years ago, nationalization of private savings sent Argentina’s economy into a long-term downward spiral.

Income and Wealth Redistribution

The majority of witness testimony during recent hearings before the House Committee on Education and Labor showed that congressional Democrats intend to address income and wealth inequality through redistribution.

On July 31, 2008, Robert Greenstein, executive director of the Center on Budget and Policy Priorities, testified before the subcommittee on workforce protections that “from the standpoint of equal treatment of people with different incomes, there is a fundamental flaw” in tax code incentives because they are “provided in the form of deductions, exemptions, and exclusions rather than in the form of refundable tax credits.”

Even people who don’t pay taxes should get money from the government, paid for by higher-income Americans, he said. “There is no obvious reason why lower-income taxpayers or people who do not file income taxes should get smaller incentives (or no tax incentives at all),” Greenstein said.

“Moving to refundable tax credits for promoting socially worthwhile activities would be an important step toward enhancing progressivity in the tax code in a way that would improve economic efficiency and performance at the same time,” Greenstein said, and “reducing barriers to labor organizing, preserving the real value of the minimum wage, and the other workforce security concerns . . . would contribute to an economy with less glaring and sharply widening inequality.”

When asked whether committee members seriously were considering Ghilarducci’s proposal for GSAs, Aaron Albright, press secretary for the Committee on Education and Labor, said Miller and other members were listening to all ideas.

Miller’s biggest priority has been on legislation aimed at greater transparency in 401(k)s and other retirement plan administration, specifically regarding fees, Albright said, and he sent a link to a Fox News interview of Miller on Oct. 24, 2008, to show that the congressman had not made a decision.

After repeated questions asked by Neil Cavuto of Fox News, Miller said he would not be in favor of “killing the 401(k)” or of “killing the tax advantages for 401(k)s.”

Arguing against liberal prescriptions, William Beach, director of the Center for Data Analysis at the Heritage Foundation, testified on Oct. 24 that the “roots of the current crisis are firmly planted in public policy mistakes” by the Federal Reserve and Congress. He cautioned Congress against raising taxes, increasing burdensome regulations, or withdrawing from international

Vooter's picture

$73 a day??? $113 a day??? WTF are these people spending money on? I spend about $5 for breakfast, $10 for lunch, and probably $5 for dinner, except on Friday and Saturday nights, when I'll go out and spend maybe $25 or $30. Granted, I don't commute by car, so my gas bill is low (although I do pay roughly $5 a day to commute by subway), but even if I were driving 50 miles a day, that's about two gallons at $4 a gallon, so $8 a day for gas. So let's say I spend $30 a day on food and $5 to commute. That's $35. What else is there? Let's say my dumb little brain has overlooked $20 somewhere in my calculations--that's $55. What else is there? What are these people spending money on?

DavosSherman's picture

What are these people spending money on? [in addition to debt, debt, debt and debt service]...

I am Jobe's picture

Home of the pussies

Walmart security guard shoots 'shoplifting' mother dead in parking lot as she tries to escape with two young children

Read more:
Follow us: @MailOnline on Twitter | DailyMail on Facebook


DavosSherman's picture

Too bad this guy worked for Shit-Mart and not us.  Where the fuck was he when TARP passed after the banksters stole $10.4 ++ trillion?

That's the problem with the US, 5 percent of the world's populus and 25 percent of the word's prison population.  Of course, if your an off duty sheriff you can shoot to kill a shoplifter and have your own fucking trial, jury and sentence right in Shit-Marts parking lot.

orangegeek's picture

Deflation is here and has been for a while.  Government loves to fuck around with indicator formulas, particularly the CPI, but even they have run out of rope.


The last balls to drop are the NYSE and the NASDAQ.


SP500 index topped in September.


When Q4 reporting starts rolling in, the markets are going to take a beating.

DavosSherman's picture

You fucking moron, there is no fucking deflation dickhead.

falak pema's picture

if he is fukking, he is no moron unless she is sharonless basic instinct; and he is definitely not deflated, especially at dickhead!

Choose your meat -a- fore better! 

I am Jobe's picture

wait there is need for more fucking apps and phones. Uggh

DavosSherman's picture


+1 I am Jobe.

It hurts my brain to comprehend that in 2009 there were more suicides than vehicular fatalities.  37,000.  I hate "smart" phones.  Another one of societies ills, another falesly named delusion.

Driving these days I'm amazed at how many "smart" phone users I see with one eyeball ona the road and one eyeball on FB, texting or email.

shovelhead's picture

I'm going Galt ...

Right after I get my Obamacare Penile Enhancement Surgery.

I'll give those Obama phone gals something to talk about.

krispkritter's picture

I want my free Oboner!  "Does this thing have call waiting and can I buy groceries with it?"

d edwards's picture

Hmmm-"consumer and economy are alive and dead" IT'S THE ZOMBIE ECONOMY APOCALYPSE!!

MilleniumJane's picture

Double tap, as my stepson would say.

BKbroiler's picture

Obama cock!  Everyone's getting one!  "Do you accept Obama cock?" "Of course sir, just swipe it"

new game's picture

yes we are doing the opposite of most because we are fiscaly responsible; wow, what a novel concept, live within ones means and get ahead of this mess by cutting expenses.

this whole fucking mess is very personel for me and describes me to a tee.

was R.E. broker(150-200k/yr)

now combined income with wife=40K

now that is some kinda income shock.

I'm ok and made some dramatic adjustments

macmansion to split entry, small refied mort.

some land paid for

all else paid for.

but feel this roaring econ like a bent over dragon breathing up my ass.

nowhere to hide, cause now it is the tax man after that last chunk of marginal income...

all a big lie to keep the confidence.

that is all they have left; like the fiat dollar, when the confidence goes look out

are you prepped? got glock? got gold? Got rice, H2O, some chocolate? booze? cigs? condoms?

got back pack? keep it simple and skill up and gear lite as possible.

do some survival training and you will realize you are expendable in fast order.

never too late....

Being Free's picture

Hang in there new game.  At least you didn't take this approach....

MORGAN HILL (CBS 5) — Two people who live in a large Morgan Hill home have been arrested on suspicion of holding a handyman hostage and forcing him to do home repairs.

Investigators said the 50-year-old victim was lured to a home on 200 block of Caldwell Court Monday morning. The sprawling 4,600 square foot home has five bedrooms and is equipped with a pool, a beach volleyball court, and a tennis court.....

DavosSherman's picture

Fucking hysterical New Game.  I'm helping someone just like you.  First sorry.  Second, clarification, hysterical because my above post, before I read yours, deals with someone almost identical to you.

You're in better shape than some other brokers.

Sorry for your pain, again!


"all a big lie to keep the confidence.

that is all they have left; like the fiat dollar, when the confidence goes look out"



DavosSherman's picture

He probably can't with a McMansion.  We know 2 selling them.  Jumbo loans are dead, cash buyers want a fucking steal.  McMansions are now maintenance queens that are magnates to asshole local guberments that overspent and are looking for cash pockets.

Obadiah's picture

I hear ya Davos, we all have to be ready to just walk the fuck away, its all just a dream anyway

DavosSherman's picture

"its all just a dream anyway"

+1 !!!

wstrub's picture

It is so sad........the marginally employed get affected first with no means of collecting benefits.  We released our snow removal company, our yard maintenance workers and our cleaning lady.  Ouch!  Savings of $1200.00 per month. I would like to get rid of the property tax bill as well so maybe the home goes next in exchange for a very small farm with minimal taxes. 

Winston of Oceania's picture

Where is John Gault? Having more than a lick of sense he's left town...

DavosSherman's picture

In one gated community that I'm doing a 8 figure accounting project for a developer "working" with the bank I've noticed homeowners now out doing their own yardwork.  On one hand this has been positive for same-name stores since they are all at Lowes buying ride-ons for their 0.3 acre lot.

But a lot of folks have done what you've done.

The Mr. & Mrs.'s work clothes are what I heart the most.

q99x2's picture

The Bernanke gonna print up some Bernanke bucks. Everything going to be OK.

MedicalQuack's picture
In the finance world the goal is to show less risk to make or receive money.  Turn this around a little and when you enter the world of health insurance and I guess this could apply this for any insurance for that matter, you have the opposite, accelerate the “risk factors” to keep money and not have to spend it. Who knows if anyone has anything close to accurate in numbers these days?  Hiding, Falsifying, And Accelerating Risk Has Become the Achilles Heel of the US Economy As the “Real” World” Clashes With the Values Created From a World of “Fictional Values” Of Formulas and Math


Then we have jerks like this that report credit information on us that operate outside the limits of the law and as a consumer you can't see it, get a a hold of what they sell about you, zero.  People like this that are so non transparent need to be run out of business e-scoring.

E-Scoring Credit Algorithms Invisible To Consumers Used to Market and Evaluate, Does Not Fall Under Federal Law And Such Are Used by Insurance Companies - How Will This Work With Exchanges –Attack of the Killer Algorithms Chapter 42
sasebo's picture

Too bad we can't find a way to stick a hot poker up Bernanke's ass.

Legolas's picture

Thanks, Wolf. 

Hope you and yours are enjoying the Holidays.

willwork4food's picture

WTF? Is this bold strike Saturday?

Midas's picture

I'll take the bold over the tiny-ass font.  Who decided that was clever?

knukles's picture

Yeah, and tomorrow is bold strike itakicized Sunday.

DavosSherman's picture

"Illene better have a nice ass, cause her financial advice is for shit."~WillWork4Food

You know with a prior threads comment like that all I'm going to say is yup, bold strike Saturday.

knukles's picture

Every man has his proirities.

DavosSherman's picture

Unemployment is 22.8 percent.

From Jim Quinn's the Burning Platform:


  • There are 16.9 million 16 to 19 year olds and 4.3 million of them are employed. That means 75% of them are NOT EMPLOYED.
  • There are 21.9 million 20 to 24 year olds and 13.5 million of them are employed. That means 38% of them are NOT EMPLOYED.

No matter how the BLS spins the data, the truth is that the youth unemployment rate in the United States of America is 54%.

Some more facts:

38 million earn less than $10,000 per year

50 million earn less that $15,000

61 million earn less than $20,000 annually

Simply put: 100 million wage earners, or 2/3 the entire workforce, earn less
than $40,000 per year.

There are roughly 127 million people dependent on government transfers: 61
million recipients of Social Security and Medicare

Medicaid for the 11 million people drawing lifetime SSI Social Security

66 million people receiving welfare (SNAP food stamps, housing credits,
Medicaid, etc.)


This fucking abortion they call an economy is on essential services, war machine, medicare, prescription drugs, social ssecurity, food stamps, student loans.  All on printed money.  Pass Go, collect $200.


garcam123's picture


zorba THE GREEK's picture

"Consumers have been giving mixed signals"

May that's because consumers have received mixed signals from

the governments' massaged reports on the economy and are

confused as to what is really happening.

willwork4food's picture



(I still am trying to figure out why my neighbor's 15 year old daughter looks like the hotties from my college senior graduatiing class. But, perhaps I shouldn't have brought that up..)

hairball48's picture


I love the wit of ZHers...some anyway :)

DavosSherman's picture

With sailer-author-narcissist-boy & ilene I focus on the post---they make up for the "articles".  Long live ZH with crap like this.  Thank God for readers with wit.

knukles's picture

Maybe she's just slow.


kliguy38's picture

I believe everything they say. Now back to Foooootballlll!