I think this is a great idea for a thread.
First of all, I do agree that this thing is in the media, and it's here to stay. And that will affect spending. People will cut back and that would affect growth. However, even if the "R" word was never out there, the poop would hit the fan sooner or later. We're in the middle of round two of a serious credit crunch and that in itself is enough to throw us into a recession. I've heard people say that if the media didn't hype the housing bubble was about to bust that it never would have happened. As if houses would just keep skyrocketing in prices until the end of time. Same thing here.
The 2007 Q4 retail numbers were pretty bad, and that's before the "R" word was out there in full force. Of course, they wait until *after* the holiday shopping season for that news
. The fact is that this was the worst holiday season in 5 years. And the concerning part of that fact is that while people spent less than the experts projected, their credit card debt, and the number of credit card defaults increased dramatically. That tells me that budgets are tight, and that maybe people are using credit cards more than ever to pay bills and buy necessities. All of this means that there is a fair percentage of people out there who are tapped out. Remember, consumer spending is 72% of the GDP. If consumer spending drops by just 1%....it's a big, big deal. But doesn't that make you think that this insanity has to end. We can't just keep taking on more and more debt, save nothing and spend more, year after year after year.
The key to how bad this whole thing will be from everything I hear is the jobs situation. I hear the bulls say that corporate America isn't overstaffed like they were in 2001. So there shouldn't be lots of layoffs.....not a lot of hiring either, but if we can avoid lay-offs, that will sure help. If the consumer really puts on the brakes, and that hasn't happened in awhile, then more jobs will be lost and this will be a deeper recession.
Another serious factor this time over 2001 is not that this could be a consumer-led recession, but also that we have the highest inflation that we've seen in 17 years. And *that's* why there's panic in the air.
My other point is that while things may feel okay now, it takes time for the effects to trickle down. When the tech bubble burst and we went into recession in 2001, lots of jobs were lost right away, but my DH didn't lose his until 2003...which is when the market bottomed.