Seattle Times writer Melissa Allison seems a bit too excited about today’s report that retail spending in Washington State grew by 10.5% from spring ‘05 to spring ‘06.
Those were the days, back in the spring when the flowers bloomed and the housing market sizzled.Washingtonians had such confidence last spring that they spent with abandon on computers, hotel rooms, jewelry and other items.
They spent 10.5 percent more than they had a year earlier, the largest increase for taxable retail sales in Washington since 1990, according to April-to-June data released Monday by the state Department of Revenue.
Rising gas prices didn’t wreck the mood and are not included in the retail-sales data.
Economists say the spending has calmed since then, doused by a slowdown in the housing market and slower employment growth.
…
The state’s economic growth and therefore the spending are propelled by employment gains, particularly in high-wage sectors such as aerospace, software and construction, Sohn said.
So, the spending is “propelled by employment gains,” but when it “calms” it’s because of a slowdown in the housing market? What a delightful contradiction. I fail to see how a 10.5% retail spending increase can be attributed to “employment gains.” Were 10.5% more jobs added? Did everyone get a 10.5% raise? Smells like false assertion to me. I think it’s much more likely that the spending increase is primarily the result of home equity extraction and a declining savings rate.
Maybe it’s just me, but the news that people are spending increasingly more as incomes stay practically flat doesn’t seem like something to celebrate.
(Melissa Allison, Seattle Times, 10.31.2006)
All the money that’s fleeing the real estate market has got to go somewhere.
But Washington remains stronger economically than the national economy, as the state rebounds after an especially hard time during the last recession.
But WA’s umemployment is still above the national average… what gives?
Washingtonians had such confidence last spring that they spent with abandon…
Consumer confidence in the overall economy has a lot to do with their confidence to indebt themselves. At least that’s a plausible and widely-held theory, implicit in the typical usage of the term consumer confidence. I think the original story is trying to say that the two stimuli; a growing local economy (especially all the Boeing press), followed by a well-publicized housing slump; directly impacted consumer confidence.
Incidentally, the PI reprinted a NYT story that the national savings rate was back up in Aug & Sept. Net personal savings was negative by $15 billion annual in Sept, after -$49 billion annual rate in Aug., coinciding with a meager 0.1 personal consumption increase. At the same time, real personal income grew by 0.8%. This constellation of events corroborates the theory.
However, I was forced to withdraw my “Yippee!” when I saw, buried deep in the article:
But government reports have consistently found that the pay of most Americans has not kept up with inflation, suggesting that the overall gains are largely the result of big increases among households in the very top income brackets, economists say.
It looks to me like the larger pattern is herd mentality, in support of the hypothesis that we’re watching a bubble deflate, although slower than nationally. My feeling is that the current standoff between home buyers and sellers will begin to resolve when Greater Seattle sellers start relinquishing some of their price position.
Oh, that was me. I got a contract and started spending 80% of my income. My contract expires soon so look for spending to go down.
Let’s see stats on how many refis and HELOCs there were in WA in the same period.
Housing ATM, anyone?