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Great Recession still affecting consumers, households

Average daily spending in 2014 trails behind 2008 numbers

While report after report shows a rebounding economy, households and consumers across the country and in San Diego seem hesitant to break out of the gloom caused by one of the deepest and longest-lasting recessions in the nation's history.

“It has been almost six years since global financial markets collapsed and triggered the Great Recession, which has had a lasting effect on American consumers," according to the Gallup Poll in its report, “A Closer Look at Consumer Spending.” "Millions of people lost their jobs; spending and investment evaporated; and bankruptcies and foreclosures intensified. Consumers lost confidence, not just in the U.S. economy but in their own financial security, too. These negative effects continue to stall economic growth.”

A quick snapshot in the report exemplifies the situation: Daily spending in the first quarter of 2014 reached an average of $84. While this showed an improvement over recent years, daily consumer spending still trails behind the 2008 average of $96.

To be sure, the consumer today is dramatically different from 2008. Surprisingly, most comparisons show a healthier, wealthier situation. The Federal Reserve says net household wealth -- assets minus liabilities -- rose to more than $81.8 trillion at the end of the first quarter 2014, an increase from $55.6 trillion in the same period in 2009.

Back then, most the country was struggling with a massive collapse in home values and a plunge in stock prices, cutting the value of the Dow Jones industrial average in half in just two short years.

Now, most houses have recovered lost value and the Dow industrials are repeatedly setting new all-time, record-closing highs.

The hardest part of the recovery has been in the labor markets. While the nation's employment situation has slowly improved, San Diego County's jobs environment has become more vibrant. The California Employment Development Department reported recently that the local unemployment rate stood at 6.1 percent in June, compared with 7.8 percent a year earlier and below both the state and national levels.

More than 1 in 3 Americans -- 35 percent -- say now is a good time to find a quality job, according to Gallup. This percentage is the highest since December 2007, the starting point of the Great Recession.

The lessons learned from the Great Recession have had an important impact on the way households manage their personal finances.

Most notably, a report from Standard & Poor's finds that the delinquency rate on mortgage, auto and bank loans declined to 1.07 percent in June, the lowest level since S&P started keeping track of defaults 10 years ago.

“Consumers have a greater capacity to meet their financial obligations due to an improving economy, low interest rates and the significant deleveraging they've done in recent years. A disciplined approach to managing debt has helped people improve their financial positions, keeping delinquencies near historic lows,” said James Chessman, chief economist for the American Bankers Association.

Since consumer activity accounts for two-thirds of the nation’s gross domestic product, where spending, savings and investing go from here will determine the course of the overall economy.

The Federal Reserve, in its monthly Beige Book analysis of the 12 districts, finds consumers are selectively picking up their spending.

The San Francisco district report, which includes the San Diego region, said, “Sales in the Internet and digital media sector increased, particularly for health and fitness e-books. In general, online retailers experienced strong sales and continued to put pressure on traditional brick-and-mortar retailers. The level of travel and tourism activity largely held steady or improved in most major district travel destinations.”

Bottom line, there is no better way to predict the future direction of the economy than the stock market, a successful leading economic indicator. At least one analyst sees the clear linkage between the current economy and stock prices.

"This U.S. economic expansion just celebrated its fifth birthday. We don't think it would be unwise to begin making plans for the sixth birthday. Likewise, this bull market is well into its sixth year. Since World War II, 60 percent of those bulls that celebrated their fifth birthday went on to celebrate their sixth. History shows, but does not guarantee, that should the bull stay alive until March 2015, investors may be very, very pleased with the U.S. equity returns,” said Sam Stovall, managing director at S&P Capital IQ.

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