Americans spent the week wishing each other a “Happy Thanksgiving” and then getting together to celebrate the holiday. Anyone recalling the atmosphere of gloom and imminent disaster that pervaded the country a year ago must agree that they have much to be thankful for.
People in the financial sector, especially in “Wall Street” – i.e. those working in and around the markets – are especially thankful. Not only did their sector not melt down entirely, but they have enjoyed, and are continuing to enjoy, the strongest stock market rally in history, which has expunged most of their horrendous losses of last year and early 2009. The bankers and other financial types are again looking forward to bonuses which, on the average, will be considerably bigger than those of last year, although still considerably smaller than those of 2007 and the preceding fat years. The more reflective members of this community – generally, the older ones – also remind themselves that, this year no less than last, “your job is your bonus” and any bonus they receive must be considered icing on the cake.
The sector that, along with finance, vies for the title of ‘hardest-hit’ is retail. The hit has indeed been heavy, as the macro data show and as the anecdotal evidence of closed stores, whether in malls across the country or on Manhattan’s Fifth Avenue, amply testify. But today, ‘Black Friday’ and the most important single day of the year in the shopping calendar, people queued outside shops from the small hours of the morning, to be among the first to participate in the grand shopping binge that kicks off the Christmas season. They may spend less and they may be more cost-conscious, but shop and spend they will.
Overall, the inherent optimism that characterizes American society, spurred by concerted cheer-leading by senior figures in government and by mainstream economists, has enabled most people to maintain their belief that they personally, and the country as a whole, have succeeded in absorbing the blow and are now ready to move forward, albeit groggily. That optimism is itself a vital asset, but it is essential to realise that the key factor in generating and sustaining this positive mindset is not the ‘wealth effect’ of rising share prices, but rather the prosaic fact that ‘most people’ are still employed, that their fear of losing their job has eased and that there seem to be more job openings becoming available recently. In other words, it is the daily reality of having a job to go to and the monthly reality of receiving a paycheck, that are the litmus test of how people feel, and hence act. This is especially so with regard to shopping, or ‘consumption’ in economic jargon, which served as the engine of economic activity during the boom years – and for which no substitute has yet emerged.
This background makes it easier to understand why the atmosphere surrounding the season of holidays, good cheer and above all of spending, is so much improved. There is a widespread belief that the American and global economies experienced a massive disaster last year, yet have lived to tell the tale this year. ‘Most people’ take the view that, although it will take time and probably won’t be a smooth ride, their situation will improve over the next few years. That is something that can be understood and appreciated – and hence can be celebrated and given thanks for.
But the renewed optimism and good cheer are very fragile. They advance on very thin ice – again, not because the stock market might drop or other negative financial developments occur, but because the situation on the main economic front of employment and unemployment remains stressed. Job losses are still running at a high pace and, in addition to the millions who have lost their jobs in the two years since the recession began, there are millions more who are working part-time because they can’t find full-time employment. The government and mainstream economists note that the labor market always turns up after the other main economic indicators have done so, but the worry remains that households focused on reducing their debt burden will not generate the additional demand needed to create large numbers of new jobs. This year’s Thanksgiving is therefore about still having a job, or the prospect of getting one – tied into which, of course, are a slew of other concerns, from the concrete one of having a home to the abstract one of having self-respect. Once taken for granted, these are now the primary things for which Americans give thanks.