A Drag on the Economic Rebound: Consumer Spending
Don’t get too excited about signs of life in the economy. Some days it seems there’s good news everywhere: home sales ticking up, slower job losses, the Dow turning positive for the year. But all that misses a looming reality. American consumers, whose overspending largely got us into this mess, are still under massive pressure, owing to the record debt they racked up during the boom years. People are unwinding those burdensome obligations — from mortgages to car loans to credit-card debt — as fast as they can, but the process is sure to take years, and until it is complete, the economy can’t fully bounce back. “Even though we’re probably past the worst in the business cycle and probably even in the bear market, we’re talking about something much bigger here,” says David Rosenberg, chief economist at money manager Gluskin Sheff. “The largest balance sheet in the world is the U.S. household balance sheet, and it’s contracting at a record rate.”
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