All I want for Christmas is … Job Security

The Grinch who stole Christmas likely can’t compare to a lingering economic recession when it comes to curtailing holiday cheer.

For the second year in a row, some polls suggest that the long-running downturn in the economy is likely to lead to fewer and smaller presents under the Christmas tree as a still hefty percentage of people are vowing to keep their belts tightened.

Government data on actual consumer spending seems to back up the polls two months in advance of the traditional holiday spending spree. On Friday, Wall Street stocks tumbled on a Labor Department report that consumer spending had dropped in September by the largest margin in the past nine months — despite other signs the economy is improving.

The reason for such focus on consumer spending is simple, since consumer spending accounts for about 70 percent of the nation’s gross domestic product.

“There can be no sustained economic recovery so long as consumers are frightened to the point that they are saving every dime they can put away,” said Dr. Bruce Yandle, an economist and professor emeritus at Clemson University and former executive director of the Federal Trade Commission.

Yandle said economic data shows total personal savings in the U.S. has risen to a $500 billion annual rate from about $100 billion before the “Great Recession” started. “This means earnings that previously went to consumption are being shifted to pay off debt and increase reserves,” he said.

Lingering high unemployment only adds to the cautious nature of consumers. Even as the recovery takes hold, vast differences in how the downturn impacted jobs means it will take some areas longer to recover than others.

Cherokee County had an unemployment rate of 16.2 percent in September, nearly double what it was a year ago.

“When will consumers relax and start spending? When they see their neighbors, their family members and themselves head back to work,” Yandle said.

Dr. Paul LeFrancois, professor of economics at Limestone College, said South Carolina as a whole not only has a high unemployment rate (11.6 percent in September) but also ranks 45th in the nation in per capita income.

“Lower income levels and higher unemployment rates suggest consumers in the area are going to have limited discretionary income to spend during this holiday season,” he said.

LeFrancois said the most recent data about consumer confidence showed it declined in October.

“I think the major concern reflected in the consumer confidence number is the jobs outlook,” he said. “As long as consumers are concerned about keeping their jobs, or they are concerned about finding a job if unemployed, confidence levels are going to remain low. Consumers will be very hesitant to increase spending levels in any significant way.”

According to a poll released by Consumer Reports last week, as much as 65 percent of all Americans plan to cut holiday expenses for Christmas 2009 — just a little less than the 76 percent of Americans who said they planned to cut holiday spending last year.

On a bright note, however, Consumer Reports noted that retailers already have been responding to consumer concerns with “aggressive” discounts months ahead of the Christmas holiday.

“This year, it all comes down to value and getting the most bang for your shopping dollar,” said Tod Marks, senior editor at Consumer Reports.