New threat to the economy: Americans are saving like it’s the 1980s
– CNN Business, May 13, 2020, Matt Egan
Batten Down The Hatches
“Americans are slashing their spending, hoarding cash and shrinking their credit card debt as they fear their jobs could disappear during the coronavirus pandemic.
US credit card debt suddenly reversed course in March and fell by the largest percentage in more than 30 years. At the same time, savings rates climbed to levels unseen since Ronald Reagan was in the White House.
The dramatic shifts in consumer behavior reflect the unprecedented turmoil in the US economy caused by the pandemic. Although caution is a logical response to that uncertainty, hunkering down also poses a risk to the recovery in an economy dominated by consumer spending. A so-called V-shaped recovery can’t happen if consumers are sitting on the sidelines.
More than 33 million Americans have filed for initial unemployment claims since mid-March, and economists warn the jobs market won’t return to pre-crisis levels for years.”
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Through the WI lens
Americans are building cash reserves to help them through the storm. That’s the key message this piece conveys, as it reports how a raft of measures that indicate how confident people are feeling about the economy and their personal financial situation went dramatically into reverse in the space of a few weeks. A survey by the New York Federal Reserve showed that almost 21 per cent of those canvassed expect to lose their job in the next 12 months, with record lows reported for expected earnings, income and spending growth. And the response from consumers was a 31% drop in ‘revolving credit outstanding’ – the amount that is not paid off on credit cards each month, the largest one-month decline since January 1989, while the savings rate jumped from 8% in February to 13.1% in March – the highest since November 1981. The take-out from this? Wellbeing cannot exist at a more elevated level without our basic needs being met – the bottom two layers of Maslow’s Pyramid. Business and society at large need to understand that financial security has risen dramatically in the priorities of consumers and has paradoxically assumed the status of an unattainable luxury for many. Even before Covid one in four people with mental health issues had financial wellbeing issues and we can expect to see that rise. Above all, the cost of lockdown in human terms – mental and physical health and a lower quality of life for those blighted by the economic consequences – is going to become increasingly apparent in the months and years to come.
What this article goes on to explain is how positive thinking – described here as ‘thriving’ – can counter the effects that come from the negativity outlined above, from reduced memory to diminished performance. Based on studying people in a series of organisations in different industries, one of the authors has found that people who attain this state are more resilient, experience less burnout, and are more confident in their ability to take control of a situation
“Behind the jargon what this is really about is how we address the challenge of biodiversity under threat, move away from fossil materials like plastic and concrete, and use nature in a sustainable way, all of which could be summed up by “living in harmony with nature”.”
“In the new ‘consensual contract’ between employer and worker, what’s required is a commitment from the employer to safeguard the wellbeing of their people, and a commitment in return from employees to take personal responsibility for their performance of their job.”
“Could loneliness not only be damaging our mental and physical health but also be making the world a more aggressive, angry place? And if so, what are the implications for a cohesive society and democracy?”
“On such fragile foundations are built the first steps towards a more ethical kind of business, and who knows what virtuous circles might result?”
“Scientific evidence recently emerged that, contrary to earlier beliefs, Covid-19 can be spread by tiny droplets that we breathe out when we respire, called aerosols.”
“Economic wellbeing is part of the story, but it is also about finding less stressful lifestyles, in which healthy diet figures as a meaningful measure of success.”
“The industry has every asset needed to be a guiding light in the shift toward personal health priority. Will that become a prevention legacy, a ‘phoenix rising’ from the Covid-19 ashes?”
“Looking at the bigger picture, putting the measures in this order represents a lost opportunity that the pandemic could have offered for a cultural pivot pivot towards getting people more focused on their health, a powerful statement of intent.”
“Employment is necessary to fulfil our most basic human needs such as food and shelter. Any significant increase in long-term unemployment will spell a retrograde step for human wellbeing like no other.”