Three economists gave their forecasts at the Executives’ Club of Chicago today, and the U.S. consumer, both as a spender and a worker, played a critical part in the predictions for 2010.
In making his case for 2010 that “the economy will surprise on the upside,” Dr. Robert J. Froehlich, Senior Managing Director The Hartford Financial Services, said, “The U.S. consumer is not as bad as we think.”
On the other end of the spectrum, Dr. Gary Shilling, President, A. Gary Shilling & Co. started with his sentiment that “the U.S. consumer is key to the outlook here and abroad.” He was not optimistic. “Consumer retrenchment continues,” he said.
Diane Swonk, Chief Economist & Senior Managing Director, Mesirow Financial, made the case for continuing low employment. “Unemployment insurance is one of the largest stimulus packages out there.” Not much consumer confidence in that one.
But it got me to thinking about consumer buying and spending. I happen to know that consumers are starting to spend more because I listed some items on Craigslist before the holidays and got no interest at all. I had some friends who had the same experience.
In the last week, interest in the relisted items has been very high. People will buy them, and their spending will not get counted in goverhment consumer spending reports. It will be shadow spending, bargain purchases to move unused and unwanted goods while raising cash that will find its way back into the counted consumer economy.
It will be a good thing, unlike the shadow banking system that flooded the economy with inexpensive credit, leading to the purchase of some of the goods that have found their way into the Craigslist economy, a phenomenon of the great recession, as the following chart shows:
U.S. consumers are resourceful and will “make the most of what we have left and make a brighter future,” as panel moderator and Chicago Sun-Times financial columnist Terry Savage put it. Shadow spending through the Craigslist economy is one way consumers are recovering. The trick will be for shadow spending to convert into spending on new goods for growth.