Staycations and Austerity Programs: Coping with Lower Incomes

A good friend and colleague of mine spoke recently of the virtues of the boxed wine he now carries in his refrigerator.  At less than the equivalent of $5 per bottle, he has free-flowing and well-kept wine at his disposal like a brewmaster would tap a keg.  Only twelve months ago my colleague was choosing which quarterly shipment from cult Zinfindel winemaker Turley he would receive as part of his wine club.  The shipments generally run at club prices over $200 per shipment.

Welcome to the new reality of summertime staycations and austerity programs.

This week the Bureau of Economic Activity (BEA) released their June figures for disposable personal income (DPI) and personal savings rate.  The news was less than encouraging.  For the first time since Americans toyed with the misaligned concept of zero or negative savings rates, the personal savings rate fell from 6.2% (adjusted) in May to 4.6% in June.  The decline represents the first time since the onset of the economic crisis last fall that the personal savings rate has fallen, creating speculation that Americans are beginning to “tap out” the various ways that they are able to adjust to the post-crisis environment.

(For more information on the latest economic report please visit

The news for manufacturing companies is continued cautious optimism, with new orders expanding for the second continued month according to the Institute of Supply Management (ISM) monthly report.  Inventory reductions were less in July, showing signs that over-capacity inventory levels may have reached a level where replenishment can occur.

With the seasonal reductions in productivity for August in both manufacturing and service sectors, many families are choosing to stay home for vacation (Webster’s New World Dictionary add for 2009: “staycation”) and openly discussing over gourmet meals at home new forms of austerity programs.  Realize that most Americans still have some form of employment or livelihood (10% unemployment loosely equates to 90% employment, albeit some of that employment may be “under employment” or employment under economic duress).  Clearly this is not your grandfather’s and great-grandfather’s depression: there are no soup kitchens in middle class neighborhoods.  However behavior has changed.

We know this based on the level of business investment that is occuring (or not occuring) since the credit crisis began, which impacts the level of output, which in turn represents the employment outlook for many Americans.  NBC’s Morning Meeting recently discussed this and the impacts into the federal budget forecast.

The challenge will be to create value in the marketplace through adding value as the discussion asserts.  In this case manufacturing drives employment increase, increased business tax revenues, personal consumption, and individual tax return levels. 

In the meantime, families are still enjoying the summer months, and my colleague still swears by his box wine sitting in the refrigerator.  We occassionally break out one of his finer selections found gathering dust in his cellar, and remind ourselves that, like the current business cycle, better times lay ahead.


Leave a comment

Filed under Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s