America is cautiously optimistic about exiting this recession. Slowly but surely, more signs of recovery are popping up. This week, Americans became richer and the job market improved. And the retail sector is ready to welcome our extra spending with new gadgets galore. (The tips in Holiday Spending Or Spending Holiday? will have you singing "Joy to the World" well into the New Year.)
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U.S. Households in Better Financial Position
The Federal Reserve reported on Thursday that Americans cut their household debt for the first year on record. The figure, which includes consumer debt as well as mortgages, fell 1.7% in 2009, to $13.5 trillion. The decrease is most likely the result of defaults and bankruptcies, which, while not ideal, does reduce a household's debt, freeing up cash flow to be spent, thus stimulating the economy. The upside is that American savings jumped from 1.2% in early 2008 to 4.1% in late 2009.
American households are deleveraging, downsizing and making painful cuts to get their spending and their debt under control. But it's a step in the right direction, and fuels the hope for a stronger economic recovery. (Find out how these two agencies create policies to stimulate the economy in tough economic times, in The Treasury And The Federal Reserve.)
Job Market Perks Up
Speaking of better financial positions, shedding debt will only help so much without steady income. The job market is luckily continuing to make small gains with the number of job openings up from 2.5 million to 2.7 million at the end of January. February marks the sixth consecutive month that the job market has improved in the U.S., due to an increase in manufacturing production according to private research group The Conference Board. The group's Employment Trends Index, which aggregates eight labor-market indicators, including claims for unemployment insurance and job openings, has risen by 13.4% in the last six months. (In A Review Of Past Recessions, we look at the biggest economic declines in the U.S. since the Great Depression.)
Economists were expecting a decline, but instead retail sales grew by 0.3% in February. The surprise jump led U.S. stocks to open higher on Friday, and is another positive sign that the economy is on the mend. The gain was depressed by a 2% decline in the auto industry (Toyota, we're looking at you). Consumer spending accounts for 70% of total economic activity, and it looks like Americans are relaxing the grip on their pennies ever so slightly. So where are they spending them?
It's probably not being spent on Toyotas right now. The harrowing tale of a California man's Prius speeding up to 90 miles an hour on the interstate and not slowing down, despite breaking, putting the car in neutral and turning off the ignition, has consumers demanding answers. (Forget the planet for a minute - what really matters is whether these vehicles fit your budget. Find out more in Hybrids: Financial Friends Or Foes?)
The technology sector, however, is making a play for that money you're saving. Apple started taking pre-orders for its highly anticipated iPad on Friday. The Apple Store website was down briefly Friday morning, but has since reopened to take the pre-orders. Those who do order won't receive the product until April 3, unless they order the model with the 3G radio for $130 more than its 3G-less counterparts – then be prepared to wait until the end of April. Each customer is allowed to pre-order up to two units.
Another toy to watch for is Sony PlayStation 3's new motion controller called PlayStation (PS) Move. The control is meant to take the Nintendo Wii console one step further, in terms of precision and responsiveness in motion detection gaming interfaces. It translates your true-to-life movements into character movement on screen for everything from punches to sword strokes to tennis swings. A starter kit with game will be less than $100, and while no release date has been set, you can expect to see it hit shelves later this year. (Level up your winnings by investing in this fast-paced, highly skilled industry. Learn more in Power Up Your Portfolio With Video Game Stocks.)
If you like your technology purpose-driven rather than playful, Cisco Systems Inc. unveiled a new router, called the CRS-3, on Tuesday that can transmit three times as much data as its current hardware. However, these routers are intended for telecommunications companies rather than your living room – especially with the price tags starting at $90,000. What it will do is allow the major internet service providers to more efficiently handle traffic, with the end goal of offering more high speed connections to consumers.
The Bottom Line
The economy is recovering, but it's at a sleepy turtle pace. What's important to watch for is action that creates a sustainable revitalization – so stick to your budget, but don't stop spending completely. Every aspect of the economy is contributing to the upswing – we're in it together. (Recovering from an economic slump isn't the easiest thing to do, but here are a few potential methods of rebuilding. Read Profiting From A Consumerless Recovery for more information.)
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