Millions of U.S. workers have lost their jobs, and thousands more are either worried about their job security or are already dealing with reduced work hours or salaries. It’s difficult to spend money when you’re not making any, and it’s not sensible to go on a shopping spree when your future income is reduced or uncertain. To a lot of people, it makes much more sense to stow any extra cash in savings or use it to pay down debt.

Unfortunately, the increasing rate of our collective savings is not doing the economy any favors. Cash inflows are needed for the economy to rebound and begin growing again.

Surprisingly, retail sales in January increased by 1%. This is not an enormous jump, to be sure, but compared to the previous seven months of declines, maybe it does provide a little ray of sunshine. Some analysts suggest that consumers were taking advantage of retailers’ massive mark-downs. Others were frankly cynical about the increase, based on their conversations with retailers, and expect the figure to be revised downward.

In any event, how do we find a balance? Spending might be better for the collective economy, but it’s just not fiscally responsible for a lot of us. If we all agreed to buy one $25 unnecessary item, would that be enough to make a dent?

Links

• "Retail Sales Rebounded Unexpectedly in January"
• "Why Saving is Killing the Economy"