Consumption is back - and GDP has no bigger component. Government spending, exports, and investment are all small by comparison to consumption's 70% of GDP. So as consumption goes up, so does GDP.
On September 15, 2008, Lehman Brothers declared bankruptcy. A month later, the S&P 500 had dropped by a quarter. Two months later, it had dropped by a third, wiping out trillions in value and triggering the financial crisis that would become the Great Recession. Jobs losses during the next 12 months would total more than 6 million - this in an American economy that had never ever created 6 million jobs in a single year. (Or even 5 million jobs, only once creating more than 4 million jobs in all of American history.)
On September 15, 2008, Lehman Brothers declared bankruptcy. A month later, the S&P 500 had dropped by a quarter. Two months later, it had dropped by a third, wiping out trillions in value and triggering the financial crisis that would become the Great Recession. Jobs losses during the next 12 months would total more than 6 million - this in an American economy that had never ever created 6 million jobs in a single year. (Or even 5 million jobs, only once creating more than 4 million jobs in all of American history.)
The good news is that we're recovering. The stock market has bounced back. The
housing market is bouncing back, up nearly 11% in the last year with its biggest annual gain in 7 years.
Now, it seems that everyday purchases are up. Gallup measures Daily US Spending, "not counting the purchase of a home, motor vehicle, or normal household bills."
In the three months before the Lehman Brothers' bankruptcy, Gallup's measure of daily spending averaged $96; in the three months after, the average dropped to $86. It got worse the next few years: in 2009, 2010, and 2011, it averaged $64, $65, and $68, about a third less than what it had been prior to Lehman Brothers. Given consumption matters so much, this dip in spending was a huge drag on the recovery. But that's changing.
So far this year, average daily spending is $85. That's still not where it was before Lehman Brothers, but it is up 30% from 2009 through 2011. Last year the 3-day moving average broke $100 only 7 times; already this year it has broken $100 15 times.
This far exceeds what it was in 2010 when daily spending broke $100 only twice - the 22nd and 23rd of December. In 2011, it broke $100 only on Black Friday.
It's only Memorial Day but already beginning to look a lot like Christmas. At least to retailers. And that could make the biggest difference of all.
Now, it seems that everyday purchases are up. Gallup measures Daily US Spending, "not counting the purchase of a home, motor vehicle, or normal household bills."
In the three months before the Lehman Brothers' bankruptcy, Gallup's measure of daily spending averaged $96; in the three months after, the average dropped to $86. It got worse the next few years: in 2009, 2010, and 2011, it averaged $64, $65, and $68, about a third less than what it had been prior to Lehman Brothers. Given consumption matters so much, this dip in spending was a huge drag on the recovery. But that's changing.
So far this year, average daily spending is $85. That's still not where it was before Lehman Brothers, but it is up 30% from 2009 through 2011. Last year the 3-day moving average broke $100 only 7 times; already this year it has broken $100 15 times.
This far exceeds what it was in 2010 when daily spending broke $100 only twice - the 22nd and 23rd of December. In 2011, it broke $100 only on Black Friday.
It's only Memorial Day but already beginning to look a lot like Christmas. At least to retailers. And that could make the biggest difference of all.
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