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See if the recession is over at 12:01 a.m., Dec.1

11/4/2011

Economists may be feeling good after a government report that showed third-quarter GDP grew at 2.5%, but try telling millions of Americans who shop at Walmart stores at 12:01 a.m. on the first of the month that the nation is no longer in a recession.


After the clock ticks past midnight on the first of the month is when those on government assistance programs see their electronic benefit transfer cards reloaded with the new month’s funding allocation and they are again able to purchase life’s necessities. This type of behavior remains evident in Walmart stores, especially those in the nation’s most economically distressed areas, according to executives with the retailer who spoke earlier this week at several conferences held in Northwest Arkansas.


And the depressing reality is the situation doesn’t appear likely to change, at least according to recent research and several of those who participated in University of Arkansas Sam M. Walton College of Business Center for Retailing Excellence Emerging Trends in Retail Conference.


“We are going to be dealing with some of the things we are seeing in the economy longer than we may have originally thought,” said Walmart chief marketing officer Stephen Quinn. “We are looking at a relatively tough economy for the foreseeable future.”


Count Quinn among those who believes the so-called Great Recession continues and continues to impact shopper behavior.


“For a lot of our customers, the recession never ended, and we don’t see it ending,” Quinn said.


He cited median income statistics that show average household income has declined to $49,445 in 2010 from $53,252 in 1999 and noted that 15.1% of the nation’s population, or 46.2 million people, now live below the 2010 poverty line of $22,314 for a family of four. In just a few years, the nation has gone from 43% to 77% of households who say they live paycheck to paycheck, according to Quinn.


Even if households had higher income levels, they might not spend their hard fought dollars because, as Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas, noted, there is still some deleveraging that needs to take place with households whose savings rates are low.


And then there is the issue of confidence and lack of certainty about what actions elected officials are going to take next to resolve the nations difficulties. To the extent this issue weighs on the psyche of consumers, the depressing reality is the nation could be coping with a crisis of confidence throughout 2012 due to political bickering, which hardly seems likely to diminish in a presidential election year.


Democrats are quick to highlight any positive economic news as an indication the country is on the right track and with a stay-the-course campaign positioning already evident. Meanwhile, Republicans are quick to point to any hint of economic weakness as evidence that the junior senator from Illinois who rode an uplifting message of hope and change all the way to the White House has no idea what he is doing when it comes to the economy. All the while the electorate is stuck in the middle as elected officials and those who would like to unseat them debate why the country is screwed up, whose fault it is and what can be done to fix it.


This is hardly a recipe for consumer confidence, especially given all the other constraints on spending. It explains why a recent study by Nielsen showed that 92% of U.S. Internet consumers think the country is still in a recession, and two thirds doubt the economy will be out of the recession within a year. Those findings are part of a global online consumer survey in which more than 28,000 people from 58 countries participated.


Among the more disturbing findings, when asked, “How will you spend spare cash?” the top U.S. response, given by nearly one third of respondents, was that they have no spare cash. Of those with spare money, 31% reported plans to stash it away in savings and another 28% said they will pay down debt. Compared with last year, 76% of respondents reported changing their spending habits to save on household expenses. Of the changes made, the top three were saving on gas and electricity (65%), cutting back on out-of-home-entertainment (62%) and spending less on clothes (59%). Switching to cheaper grocery brands (58%) and buying take-out less often (54%) rounded out the top five.

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