Associated Press
After dodging two rounds of layoffs at his company last fall, Jason Edmonds decided to splurge on a new $5,700 high-definition television with money saved by refinancing his mortgage. But now, Edmonds and his wife are cutting back.
"We’re going to sit tight and try to save some money," said Edmonds, 36, a technology consultant in Portland.
The Edmonds’ spending helps explain the nation’s remarkably mild recession,, despite widespread layoffs and depressed corporate profits.
But their newfound restraint begs the question: How long will the spending last?
It is a question that resonates in consumers’ stories across the nation. People are buying electronics, even while acknowledging higher debt and shrunken stock portfolios. They worry about losing their jobs, but not enough to decline low-interest, or in some cases no-interest, deals on homes and automobiles.
The results have been striking: The U.S. economy grew by a faster-than-expected 1.4 percent rate in the final quarter of 2001, rebounding sharply from the 1.3 percent third-quarter loss following the Sept. 11 attacks.
Consumers ratcheted up spending on costly manufactured goods such as cars at a rate of 39.2 percent in the fourth quarter, the biggest increase since 1986. Total consumer spending rose at a brisk 6 percent rate, the largest gain since 1998.
Economists now say the recession, which officially began a year ago, is probably over and may be recorded as the mildest in U.S. history.
"For most people in the country, the economic picture is fairly decent and doesn’t seem too likely to get any worse," said Oscar Gonzalez, an economist at John Hancock Financial Services in Boston.
Mike Lewis of Roseville, Calif., doesn’t need statistics to tell him the economy is improving — he’s seen a surge of orders at the wine distributor where he manages the night shift. Lewis acknowledges the strong sales may be due to the high concentration of government jobs in the Sacramento suburb, which has insulated it from the tech slowdown.
Still, Lewis, 44, remains confident. He has arranged a line of credit secured by his home and is prepared to invest as much as $350,000 to buy a small business, such as a Mailboxes Etc. franchise.
"I’m feeling very good about the economy," he said.
Even so, economists — including Federal Reserve chairman Alan Greenspan — caution that America’s buying frenzy can’t last. Greenspan predicts a subdued recovery.
If Greenspan is right, there may already be some warning signs.
"The sales aren’t picking up," said Julio Cortez, 50, a 10-year retail operator in downtown Boston who says dampened travel has cooled interest in his hats, scarves and sweaters. "This has been one of our worst years."
Still, that isn’t deterring consumers such as Harry Feltmann, a mail handler in the St. Louis suburb of Union.
The 51-year-old and his wife racked up $3,000 in Christmas charges — nearly double their usual amount — but he isn’t worried. Feltmann is now looking to spend as much as $1,400 on a video camera, even after switching to a credit card with lower interest rates because of higher debt.
"The economy has its fluctuations," Feltmann said.
Copyright ©2002 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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