Consumer spending drop is visible

March 13, 2008 12:00:00 AM PDT
The trouble in the economy has spread well beyond real estate. A panel of economists for the Wall Street Journal Thursday said the U.S. is now in a recession. They predicted payrolls will grow by a mere 9,000 jobs a month, for the next 12 months. And they forecast the unemployment rate to rise to 5.5 percent. Their views were reinforced today by numbers from the Commerce Department showing a drop in retail sales in February, three times bigger than expected.

Park Street in Alameda might as well be the neighborhood next door, but it is also an American economic microcosm.

"Well we've been pinched for a long time," said Mia Nadolski.

Only now, that pinch is beginning to hurt. Mia Nadolski, mother of two, shoppng for kids clothes on this day when the Commerce Department released February's consumer spending report card.

The latest numbers show a drop in consumer spending of six-tenths of one percent, which might not sound significant, except that it's three times worse than expected. And, it is the second time in three months that consumer spending has dropped.

"Well it is significant. Just because a small percentage is still large, and don't forget it's a decline," said Sylvia Allegretto.

The numbers did not surprise Sylvia Allegretto, an economist at UC Berkeley. Not with the lending crisis, declining real estate values, and increasing fuel costs. She describes an economy in need of a break.

"So if the wages aren't increasing and we can't go to the banks because of the credit crunch, and they can't take anymore money out of their houses, then consumer spending will decline," said Allegretto.

And you can feel that on Park Street, even in the jewelry store where owner Mahesh Shaw feels a decline in retail sales.

"I was doing last year 25 percent more than what I'm doing right now," said Shaw.

But it's not all bad. In the back of the store, his repair business is booming. Andrea Anderson brought in a broken watch.

"It's cheaper to get it repaired," Anderson said.

"If the economy were better, would you buy a new one?" asked ABC7's Wayne Freedman.

"Probably," said Anderson.

So while the government remains reluctant to say "recession," Americans have assumed the attitude and statistics reflect it.

"It's just hard because the whole society is grooved towards spending," said Nadolski.

There is no better example than Mia Nadolski, who shopped for her kids, Thursday in a consignment store.

On Park Street, the consignment store is one of those rare businesses doing well.