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From malls of Florida to Idaho fields, the slump is hard to find

By Staff writer of The Christian Science Monitor / August 15, 2002


Trillions of dollars of America's stock wealth have disappeared. Vanished. Poof.

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But try to figure where the slump has hurt most and the trail begins to look like, well, a disappearing act.

Clearly, the stock market's woes have crimped consumer spending, hurt investors, and caused thousands to lose their jobs. But compared with previous recessions, when Midwestern factory towns or defense-industry bastions on the East and West coasts were hit hard and visibly, the 21st Century's first recession looks far more diffuse.

Except for Wall Street itself perhaps, specific swaths of the United States have not experienced a huge downturn. At least, not yet. At the same time, few regional engines of growth look ready to power the nation out of its slump.

"When you look at the total impact of changes in stock wealth, it's a big deal," says Chris Varvares of Macroeconomic Advisers here in St. Louis. But stock market losses of $6.9 trillion since 2000 haven't "been strong enough to stop growth in consumer spending."

In fact, a new Christian Science Monitor/TIPP poll shows a small uptick in Americans' economic confidence. The poll's index of economic optimism edged up to 55.6, up from 54.9 in July but still below its peak of 62.9 in March. This month's gain was based on improved expectations for the economy six months from now.

Prospects for a recovery hinge on the notion that consumer spending flows mainly from salaries, not the stock market. And relatively few Americans have lost their jobs compared with previous recessions. Unemployment remains at a relatively modest 5.9 percent.

Moreover, to the degree that the economy has worsened, it has not worsened in demographically predictable ways.

For example, conventional wisdom would suggest America's retirees and those soon to retire should be panicking. After all, from 1989 to 1998, the share of 55- to 64-year-old investing in the stock market jumped by one-fifth – the biggest increase of any age group, according to the Federal Reserve. By 1998, the same group had more of its financial assets tied up in stocks (58 percent) than any other age bracket.

Not all retirees are reeling

So Charlotte County, Fla., with the highest median age of any county in the continental US (54.3 years), should be reeling. Right?

"Nothing is really down that much," says Bob Carpenter, executive director of the Punta Gorda Business & Community Alliance. Home sales have gone through the roof, car sales remain strong, and retail sales – while off from their double-digit growth in earlier years – are still posting a 4.5 percent annual increase so far this year. "In season, we have trouble getting enough people to work," says Mr. Carpenter.

OK, how about those wealthy counties? Stock market tumbles affect the top 20 percent of American households far more than the other 80 percent of households, according to Dean Maki, an economist with Boston-based Putnam Investments. During the go-go years, this group accelerated its spending. In 2000, the top fifth of households accounted for 45 percent of all consumer spending. When the market crashed, so did their spending.

But don't tell that to Douglas County, Colo., which boasts the nation's highest median household income ($82,900 in 1999). True, retail sales growth has dropped from 31 percent in 1997 to about 4 percent so far this year. And the county's unemployment has also crept back up from 1.6 percent – the lowest in metropolitan Denver – to a much more average 5.4 percent.

Still, the county's sales growth remains much more positive than the rest of the metro area. Property tax delinquencies have actually gone down, and county use taxes on automobile sales are up. About the only negative indicator is the use tax on building materials – which represents a harbinger of future construction activity. Collections have fallen nearly one-third from a year ago, says Karen Montgomery, the county's finance director.