As evidence slowly starts to mount that the worst of the recession may be behind us, some Americans are also starting to relax their purse strings after years of hunkering down.
For the past couple years, David Sweeney has squirreled any extra money he’s had into his savings account, figuring that between the recession and ensuing stock market losses he should hold onto whatever he can for retirement.
But when he received his tax refund this spring, Sweeney, 63, decided it was time to change things up. Instead of putting the $674 into his savings account, he used most of it for his first-ever trip to see a Major League Baseball game.
“What monies I did get back from the government I figured it would be nice to put back into the economy somehow,” the Westport, N.Y., resident said. “I just feel as though if everybody started just putting back a little bit into the economy, the country might pull out of this a little quicker.”
The Red Sox lost 7-6 in the 10th inning, but Sweeney said he had no regrets about his trip to Boston's Fenway Park.
“It’s a good, good memory,” he said.
As evidence mounts that the worst of the recession may be behind us, some Americans are starting to relax their purse strings after years of hunkering down.
“It feels like the whole retailing environment — it’s much improved and actually better than I thought,” said Mark Zandi, chief economist of Moody’s Economy.com.
That’s not to say Americans are necessarily poised to slip back into the shopaholic mentality that preceded this brutal recession, when the housing boom and easy access to credit caused millions to rack up alarming amounts of debt.
“In the grand scheme of things, we’re not going back to our free-spending ways,” Zandi said. “People have been chastened by events. They now realize that the economy goes up and down, not straight up.”
The emerging signs of economic improvement are cold comfort to the millions of Americans who are still looking for work after the economy shed more than 8 million jobs in just two years. Although the economy added jobs in April the unemployment rate, at 9.7 percent, is not far below its recessionary peak, leaving many without a paycheck to spend.
Still, there are signs that many consumers are growing more confident about spending money, especially those who have been able to hold onto jobs or have been emboldened by the stock market's steady rebound, Zandi said.
For high-income households, that may mean making a large purchase, such as an appliance or car, that they put off during the recession. For middle-income Americans, it could mean trading up from a discount retailer to a more upscale one, or giving up a fast-food restaurant in favor of casual dining when eating out.
Promising economic data
Economic data support the argument that Americans are slowly coming out of their more frugal shells.
Retail sales rose 1.6 percent in March, the largest increase in months, following slight gains in January and February, according to the Commerce Department. Consumer confidence rose this month to the highest level since the financial industry meltdown in September 2008, and consumers are becoming more optimistic about the jobs outlook, the private Conference Board reported.
At the same time there is evidence that many consumer remain cautious about racking up credit card debt like they did during the boom years. Revolving debt, which is almost entirely credit card debt, fell to $858.1 billion in February after rising slightly in January for the first time in months. That's a far cry from the high of $975.7 billion in September of 2008.
That may be partly because many credit card companies have become less aggressive about offering people access to credit after learning painful lessons of their own during the recession.
‘I felt really good’
Sweeney, the man who recently enjoyed his first Major League ball game, had planned on retiring from his job as a glass salesman at age 62 until the stock market drop wiped out 40 percent of his retirement savings.
Sweeney now plans to work until age 66, and he’s worked hard to replenish his retirement savings. The fact that he’s been so focused on saving made splurging on the game that much more fun.
“I felt really good about consciously being able to spend money, that kind of money, and knowing that it was for my enjoyment,” he said.
But even as some start feeling more comfortable, millions of Americans remain mired in financial worries because of the difficult job market.
About 15 million Americans are unemployed, and 6.5 million have been unemployed for 27 weeks or more. It could take years for the job market to fully recover.
The weak economy has taken a toll on consumer finances in other ways.
Lisa Weaver will be spending part of her tax refund this year to pay property taxes, and the rest is going into savings.
“When I was younger I probably would have splurged on something, but as I get older — I’m 56 — I tend to save more,” Weaver said.
She has good reason to be cautious. Last April Weaver, who had been working as a software consultant, was forced to go on disability because of kidney failure.
Weaver’s husband, a self-employed truck driver, already had seen a drop in business because of the recession, and he was forced to take time off to help care for his wife, who is awaiting a kidney transplant. The couple's savings has been severely depleted over the past year, and they have cut out any extras, like meals out or travel, to conserve cash.
Weaver, who lives in Hartford City, Ind., has been heartened to see that her husband’s business has recently started to pick up somewhat. The couple also recently paid off their house, easing their expenses.
Still, Weaver doesn’t know how long it will be until she is able to get a kidney transplant and begin working again, or whether she will be able to resume the travel-heavy consulting work she’s done in the past.
In the meantime, she expects to remain financially cautious.
“In these uncertain times it is wise to save every penny one can,” she wrote in an e-mail.