Recession Watch: Signs of the economic slowdown abound
Apr 26th 2008 9:00AM
Updated May 8th 2008 5:23AM
The good news about the recession is that there are bargains to be had for the adventurous shopper. The bad news is that many people are not able to afford them.
Times are tough and the economy is slowing. The National Bureau of Economic Research has not officially pronounced that the U.S. is in a recession -- technically two consecutive quarters of negative Gross Domestic Product Growth. GDP rose 1.9 percent last year and is expected to decline in the first quarter by 0.1%, according to Morgan Stanley.
Yet some economists, including David Wyss of Standard & Poor's, argue that a recession is already in progress. He believes that the economy is half-way through the slowdown, which he expects to be mild as recessions go. "It's still going to hurt," he said in an interview. "Recessions always do."
Indeed, signs of a recession are all around us. People are doing without a full tank of gas. They are watching their pennies at the grocery store. They are learning to do without things that they thought, until recently, they could not do without -- including $10,000 summer camps. Many are watching their homes decrease in value at an alarming rate and foreclosures have hit records.
In WalletPop's Recession Watch series, bloggers documented some of the new trends brought about by the economic slowdown. For example, some young adults are moving in with their grandparents. Businesses of all sizes are merging to save money. Others, such as a karate dojo, are adding quirky new side businesses, such as selling balloons.
Here are some other additional signs of looming recession:
Getting a reservation at your favorite restaurant has gotten a lot easier lately -- too easy for the liking of owners of dining establishments. Sales are down at chains ranging from Red Lobster to Ruth's Chris Steakhouse. McDonald's and other fast-food chains are the exception -- their profits are soaring. Richard Martin, executive editor of the Nation's Restaurant News, said in an interview that there are now a plethora of promotions under way to lure diners. "It's pretty much an across-the-board situation," Martin said.
Planning on hitting the links this summer? You may not have to worry that much about bumping into other golfers because there are fewer of them. According to The New York Times, people are quitting the sport in droves, partly because of economic reasons, such as corporations cutting back on country club memberships. This has occurred despite the popularity of Tiger Woods.
Even with weddings, people are increasingly watching their pennies. They are booking the affairs in off-peak times and reducing the number of guests they invite, according to the National Association of Catering Executives. People also are increasingly bargaining with caterers to keep their costs low without sacrificing the pomp of what should be a once-in-a-lifetime event. For example, don't be surprised if you attend an otherwise lavish wedding this year that does without a Viennese Table, a selection of deserts served at the close of an affair.
My colleague Amey Stone recently decided against buying a new mini-van. She's one of probably thousands of Americans that are delaying the purchase of a new car this year. The auto industry, which already is hurting mightily, is trying to convince buyers to jump into a new car with lots of incentives. Growing families will find great deals on the gas-guzzler of their dreams. For instance, buyers are eligible to receive cash back of $3,500 for purchasing a Ford Expedition. Deals also are available from Hummer and Cadillac Escalade for their SUVs.
When times are tough, people look for bargains everywhere, including eBay which recently reported a 12% increase in the value of transactions on its sites. Consumers also aren't shy about haggling at major retailers such as Home Depot and Circuit City, according to The Times. Take this trend one step further: we're seeing an increase in the lifestyle of Freegans, who say they "employ alternative strategies for living based on limited participation in the conventional economy and minimal consumption of resources."
Payday Loans, Cash Advances.
Shares of Cash America, a chain which operates 450 shops that provides pawn and payday loans services, have soared more than 30% this year. Christopher Tomberg recently noted in the Los Angeles Times that "before there were payday lenders, folks hard up for a few bucks had to go to an underground lender who would charge even more outrageous fees and possibly threaten bodily harm." Still, the interest rates are still pretty steep with these services (If you have to do it, here's how).
In the end, people will need to learn that in an economic slowdown, they shouldn't aim to get more with less, they should just get less. Inevitably, they will forget this lesson as soon as the economy rebounds.