Network News

X My Profile
View More Activity





Low wages, spending, factory orders cast gloom on Wall St.

By Ylan Q. Mui and Sonja Ryst
Wages and consumer spending remained virtually stagnant in June, even as Americans saved more money that month than any time in the past year.

The news, along with other economic indicators on factory orders and pending home sales contributed to a gloomy day on Wall Street.

Government data released Tuesday morning showed the personal savings rate -- the amount of each paycheck that goes unspent -- jumped to 6.4 percent, a far cry from the heady days of the spending boom when Americans logged a rate of less than 1 percent. The rate in June was the highest since June 2009.

Americans managed to sock away more money even as personal income rose less than 0.1 percent. That helped keep spending in check, as personal consumption also increased less than 0.1 percent.

The report was weaker than many economists had expected. The high savings rate coupled with the freeze in spending and income means consumers lack the firepower to fuel the economic recovery. The stubbornly high unemployment rate has spooked many shoppers, and the June data showed that the temporary boost from the government's hiring of Census workers has begun to wear off.

Also Tuesday, the Commerce Department announced that businesses didn't order as much from manufacturers in June, another sign of a sluggish economic recovery. And the National Association of Realtors reported that its index of pending home sales fell to the lowest level 2001 when it began keeping records.

Orders for manufactured goods unexpectedly fell 1.2 percent to $406.4 billion in June. This followed a 1.8 percent May decrease.

Business spending has played an important role in the economic recovery because of unemployment worries. Early last year, businesses cut back on their inventories dramatically. But then demand returned sooner than expected, so companies had to catch up and rebuild inventories to more normal levels during the second half of 2009 and the first part of this year. Now, although businesses continue to build up their inventories, they've begun to do so at a slower pace in recent months.

"The manufacturing downshift is underway, however, it shouldn't be taken as a signal of widespread weakening," said Aaron Smith, a senior economist at Moody's Economy.com in West Chester, Pa. "It represents a natural part of the cycle as producers realign their pace of production with sales."

Smith noted that the data are "very volatile," making it more accurate to to look for patterns in analyzing the reports.

"Businesses still have expansion in their sights and will provide the fuel for growth in the coming quarters

By Ylan Q. Mui  |  August 3, 2010; 12:57 PM ET
Categories:  U.S. Economy , Unemployment  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Morning briefing: Russia drought, China flooding cause jump in food prices
Next: July sales: GM's four core brands up 25%, Ford up 3%, Toyota down 3%

Comments

And why shouldn't households be saving more? They know that Obama and the Dems want to raise their taxes in 2011 and, so, are setting aside monies to meet those higher tax liabilities.

This is precisely why the economy is slowing now and why it will dip into another recession if Obama/Dems get their way and raise the tax rate to 40%.

Posted by: Anonymous | August 3, 2010 10:10 AM | Report abuse

This is a good thing. People should save money and the government shouldn't be in the business of punishing savers. Yes, I know politicians want people to spend money in a misinterpretation of Keynesan stimulus, but personally I think they're only thinking about themselves and getting re-elected in the fall, "Spend money! Keep the economy going until November 3rd!"

Times have have changed, there is no "there" there, we will not get back to the good ole days of consumer spending, as we've learned, this was a fraud anyway, fueled by cheap Chinese loans.

I know there's a economic recession that needs to be bridged, but again, that's not a valid metaphor, what really needs to happen is get readjusted to new realities. Live more simply, shed expenses and build up your safety buffer with savings. Start doing it now, instead of some indefinite point in the future when "everything is back to normal" Start fixing thing instead of stringing those problems along.

Posted by: Anonymous | August 3, 2010 10:18 AM | Report abuse

No name, Anonymous. How convenient.

Funny, Bush & Co sent out $600 a while ago to stimulate the economy. He hoped they'd spend it, which some did. Others paid bills.

I find it ironic that the GOP talks about deficits, but doesn't talk about how to decrease them. One way is by taxation.

Back in the 50's, taxation was at a much higher rate, yet the economy was better.

Can't the rich spend some money on employees?

Shouldn't hedge fund manager fees and bonuses get taxed as income, not capital gains taxes. There's a couple billion right there!

Posted by: MichelleKinPA | August 3, 2010 10:21 AM | Report abuse

when opportunities abound...
spending will go up...
until a change in mentality occurs(november) in washington...
little will change...
all these dems who are pushing thru these laws causing opportunities to dry up have what they need...
so why would they care about you...
dems stopped caring about the people...
they care only for themselves...

Posted by: DwightCollins | August 3, 2010 10:22 AM | Report abuse

Despite all the media hand-wringing about America's low personal savings rate that has been a recurring refrain over the past decade, the dirty little secret is that the health of the American economy depends on consumers overspending and living beyond their means. If American personal savings rates remain high, the economy will continue to flounder and our federal government will be in the unenviable position of promoting the overspending that got us into this mess in the first place. I can imagine our fearless Commander in Chief standing in front of a Best Buy trying to get "the folks" to buy a flat-panel TV that they don't really need!

Posted by: jshay | August 3, 2010 10:33 AM | Report abuse

DwightCollins,

Dems don't care about people? 15million people currently unemployed who will lose health insurance or already have will be able to get health care because of the new health care bill which barely passed without a single Republican vote.

What have the Republicans done or proposed to help people in these hard times except cry foul on deficits?

Remember Medicare Part D, up until then the most expensive piece of legislation ever to pass through a Republican Congress when deficits were soaring during Bush Jr. Era?

I'm so sick of Republicans/Conservatives posting comments about Democrats ignoring their own hypocritical history. We can no longer have an intellectual dialogue when the ideological basis of one party's philosophy originates from Fox News.

Posted by: SamL | August 3, 2010 10:34 AM | Report abuse

Even saving <1% of a paycheck is better than we can expect out of either party in Congress.

Posted by: Anonymous | August 3, 2010 10:39 AM | Report abuse

Consumers are taking this recession seriously and have curtailed purchases and attempting to save a portion of their income. Meanwhile, the Obama Administration is spending money as if they don't have to worry about tomorrow... the former attitude of Americans who finally learned that excessive use of credit would eventually lead to their financial downfall. How long will our government use their Chinese credit card... until our entire GNP will (just) cover the interest on our debt to communist China?

Posted by: leedolce | August 3, 2010 12:53 PM | Report abuse

SamL

You are what's wrong with this country. The demonization of the successful to pander to the majority's laziness is the white house party line.

Health care for 15 million? At what additional cost to the rest of us? The federal government is not providing it, the democrats are not providing it, the government is forcing the rest of America to finance something it cannot afford. While the intent is affable, the government cannot be the exception to fiscal responsibility.

If you think conservatives and the GOP have not been trying to float ideas, you clearly don't understand how the media works. Sadly, all news networks except Fox exposed JournoList. If you don't know what that is, god be with you and our country.

Posted by: wcc118 | August 3, 2010 1:25 PM | Report abuse

TODAY IS NOW. THE PAST IS GONE.

THE FUTURE IS SOON.

AMERICA IS GONE IF YOU VOTE DEMOCRAT.

Posted by: twotimetuna | August 3, 2010 1:55 PM | Report abuse

Does everyone in the local,state,and Federal government think it's great to increase the debt load now carried by the harried and worried consumers?
Sure it means far more tax revenues,a fewer cuts to the public employees,and their brothers in industry and the service sectors.
But consumers know you cannot feed children on promises or IOUs.

Posted by: TarheelChief | August 3, 2010 1:58 PM | Report abuse

And why shouldn't households be saving more? They know that Obama and the Dems want to raise their taxes in 2011 and, so, are setting aside monies to meet those higher tax liabilities.

This is precisely why the economy is slowing now and why it will dip into another recession if Obama/Dems get their way and raise the tax rate to 40%.

Posted by: Anonymous
------------------------
Uninformed comment. Grow up.

Posted by: Anonymous | August 3, 2010 2:48 PM | Report abuse

WHAT? This is how the US Government calculates consumer saving levels? - 'Government data released Tuesday morning showed the personal savings rate -- the amount of each paycheck that goes unspent -- jumped to 6.4 percent ...'

With unemployment what it is, have these morons ever considered we're supporting our unemployed and under-employed family members more than we've had to in 40 years???? Did the writers of this article even consider that? Many of us aren't saving - we're surviving! Idiots.

Posted by: Anonymous | August 3, 2010 2:49 PM | Report abuse

Consumers are taking this recession seriously and have curtailed purchases and attempting to save a portion of their income. Meanwhile, the Obama Administration is spending money as if they don't have to worry about tomorrow... the former attitude of Americans who finally learned that excessive use of credit would eventually lead to their financial downfall. How long will our government use their Chinese credit card... until our entire GNP will (just) cover the interest on our debt to communist China?

Posted by: leedolce
---------------------------
Not an economics major, eh? Get an education before criticizing people over things of which you are ignorant.

Posted by: Anonymous | August 3, 2010 3:12 PM | Report abuse

Here's a reason to save:

Extended unemployment benefits will not be extended again after November. The Democrats will lose too many seats in the Senate and perhaps the House as well, for that to happen.

Most of us employed, tax-paying, non-illegals have seen MANY examples of the unemployed who pass up jobs because they either don't pay as much as their benefit checks or involve work (REAL work) that they don't want to do.

Still,others refuse to relocate to where job prospects are better and prefer to sit around, mooch off relatives rent-free, and dream that their old job will come back.

It's time we put an end to the 99 weeks of welfare. If there's any hope left for this country, it's certainly not in the tax and spend socialists of the Democratic party. You know what do in November.

Posted by: Anonymous | August 3, 2010 3:28 PM | Report abuse

So, for many Americans the rational decision is to save more of their money. Perhaps we see the wisdom of having something set aside to make it through a lean period (either because of our personal situations, or because of the general economy).

In the short run, savings will dampen the recovery. In the long run, it can reduce everyone's risk of losing it all in this high-stakes gamble we call the American economy.

Posted by: Anonymous | August 3, 2010 4:16 PM | Report abuse

Maybe.

Just maybe.

Big firms should ... oh, I don't know ...

START HIRING ALREADY!

Pumping up your cash reserves won't get rid of the Bush Global Depression that President Obama managed to soften into a Major Recession.

Only HIRING will.

That means YOU.

Posted by: WillSeattle | August 3, 2010 6:32 PM | Report abuse

Why should I give American business, and especially the robber barons at the banks, my money for them to use when they are doing nothing for me? That means no purchases on credit cards that charge 23% interest when they pay you 0.5% for savings? I'm using the credit union and online banks. Chase and BoA can rot, or maybe they can eke out a profit trading with each other. This Bush recession (let's not forget when it started and built up, folks) rewarded the Banks: it's our turn now.

Posted by: Anonymous | August 4, 2010 1:17 AM | Report abuse

Wall Street is gloomy because they're finding they can't just keep ripping everyone off? Aww I feel so bad for them, not.

They need to spend money in this country if they want to make money in this country. It's not rocket science.

Greed makes morons out of smart people. That's why they're too dumb to understand what I wrote before this.

Posted by: Nymous | August 4, 2010 4:22 AM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company