Consumers didn’t come to their senses out of the blue, realizing all of a sudden that they’ve been wasting enormous sums of money on “mindless accumulation,” as a new book puts it. Instead, the Great Recession, with its destruction of investment portfolios, home values, and many people’s careers, has forced folks to come to an undeniable conclusion: The buy-happy-instant-gratification path they were on was simply, to use a popular word nowadays, unsustainable.
Now that the recession is over and the U.S. and world economy is supposedly on the road to recovery, we’re getting a good look at the “New Normal.” Not the trendy “new frugality,” in which some consumers refrained from conspicuous purchases because showing off demonstrated bad taste during a tough economic climate, and because all the cool kids were living cheaply, at least while terms like “frugal chic” were being tossed around. The real “New Normal” is one in which people are scaling back not to make due and get over a brief rough spell, but in which people are grimly adapting to genuine, long-term changes to spending habits, work, and expectations about, to use another popular word nowadays, lifestyles.
So what does the longer-lasting New Normal look like? A new report from the National Employment Law Project shows how the job market has evolved since the start of the recession. On the positive side, some industries have experienced job growth. But that positive is actually a negative for workers. How could that be? As the report says:
Growth has been concentrated in mid-wage and lower-wage industries. By contrast, higher-wage industries showed weak growth and even net losses…
Net job losses in 2008-2009 were widely distributed and included significant losses in higher-wage industries; by contrast, net job growth in 2010 has been driven disproportionately by industries with median wages below $15.00 a hour.
So, odds are that you’re more likely to be earning less than you did a few years ago—if you have a job at all, of course. You’re also more likely to have entered a world called “Perma-Templand,” in which disposable workers without benefits or anything close to job security are hired (Want good wages? Unlikely) and fired (Want a severance package or unemployment pay? Unlikely) periodically as befits the needs and whims of companies.
The other, obviously related part of the New Normal is a big, lasting change in how people shop and spend. Today, if you weren’t aware, marks the beginning of National Coupon Month, when a Coupon Fairy dressed in ragged thrift-store clothing visits homes and leaves bonus discounts for children who’ve been dutifully using their safety scissors to clip coupons in newspaper circulars. Join me in singing the Coupon Fairy song (“He knows when you’ve been browsing. He knows when you’re entering a credit card at Amazon.com’s checkout page.”)
Kidding, of course. Forgive me for the nonsense about the fairy. But pay attention to the factoids gathered on the National Coupon Month organizers. Particularly:
93% of shoppers said they will remain cautious and keep spending at their current level, even if the economy improves.
92% of shoppers have changed their grocery shopping behavior in the last two years.
In 2009, 88% of consumers said they used coupons when planning shopping lists; an increase of 10% from 2007.
51% of consumers indicate they will consider each purchase more carefully over the next five years.
These changes represent the New Normal, just as much as working for $10 an hour does. But how real and lasting is the idea that consumers just aren’t spending like they used to?
A SmartMoney post says consumer frugality is “hogwash” by taking the long view of the national savings rate:
Our current savings rate is well below the average of the 1950s, ’60s, ’70s and ’80s, and about on par with the first half of the ’90s…. [making it] plain that the eight or so years ended 2007 were anything but normal. They included two stock bubbles and a housing bubble – and wanton consumer spending.
The savings rate has now topped 5% for 20 consecutive months. Its average during this period? Just under 5.9%. Our crisis of frugality looks more like a return to normalcy, and perhaps we’re not quite there yet.
So perhaps the New Normal of saving more and spending less and more carefully is actually pretty similar to the old normal—or rather the older normal of the early ’90s. As for that decade or so ending in 2007? The norm of that era wasn’t normal at all. It was an anomaly, when “normal” people did things that would have looked stupid and abnormal to normal folks during most other eras.
However, what makes today’s New Normal different from the norms of older, more prudent times is that now and in the near future, we have an unemployment rate hovering around 10%, and those lucky enough to be employed are more likely to be earning an income hovering not much above minimum wage.
No matter how good consumers get at spending less, these factors also seem unsustainable.