[Vision2020] Idaho Business Review, 27 July 2009

[Kenneth Marcy]

More cash on hand: Retailers see spending lull, but positive signs

http://tinyurl.com/ncjx96 

Here are a few paragraphs from the middle of the story, all of which is 
located at the URL above.

<snip>

Disposable personal income – personal income less personal taxes – includes 
money available for spending or saving. Now, a stepped-up savings rate is 
coming into play.

“The consumer has a choice, and that choice has affected our economy,” said 
Steve Peterson, instructor and research economist with the University of 
Idaho College of Business and Economics. Increased savings usually is 
good, “but in the current economic climate, that might not be a good thing.”

Ordinarily, savings are translated into investment as banks take that money 
and lend it, he said. “In a recession economy, those mechanisms break down 
and the money does not get lent out, so it ends up depressing economic 
activity.”

Idaho ranked 20th in unemployment in May but saw a sharp decline in personal 
income from the fourth quarter of 2008 to the first quarter of this year, 
Steve Peterson said.

Industries that have the biggest linkages in the economy – such as 
manufacturing, agriculture and many high-end services – will have the biggest 
impacts, “mostly coinciding with higher-paying jobs, he said. In Idaho in the 
first quarter, construction was hard-hit, retail trade was hit pretty hard, 
and agriculture also was down.

“You had the disruption in the financial markets that in turn caused a lot of 
problems in construction and other downstream portions of the real economy,” 
Steve Peterson said. Consumers pulled back, and “now those have combined to 
affect every other segment of the economy.”

Government spending on unemployment benefits and economic-stimulus projects 
has some mitigating effect on job losses, but “the real question is whether 
or not the economic downturn is going to cause permanent, structural changes 
in the high-paying industries,” he said.

Idaho was down in a handful of categories in a recent U.S. Bureau of Economic 
Analysis report on personal income changes from the fourth quarter of 2008 to 
the first quarter of this year, and most of the positive economic changes are 
occurring in southern states, said economist Don Reading of Ben Johnson 
Associates, Boise. Another challenge to the economy, at least in the short 
term, is that the savings rate has increased, he said.

“We are not rocketing out of this,” Reading said.

<snip>

http://tinyurl.com/ncjx96 


Ken