Monday, July 1, 2013

Economic turns a psychological corner

An article from The Atlanta Journal - Constitution is a great discussion on the power of optimism in a struggling economy.  Have you noticed a difference in people's attitudes?  Enjoy the article.
NORCROSS, Ga. – June 28, 2013 – For Rizwan Peera, the feeling hit when he spotted “Sold” stickers slapped on “For Sale” signs in his Norcross, Ga., neighborhood.

Lisa Tilt noticed that she was hearing fewer “yeah … but” conversations among other small business owners, conversations laced with statements like, “Yeah, we’re getting by, but you never know these days.”

Maya Miller noticed that the kids’ party business her husband created while he struggled to find a good job was fully booked every weekend.

Call them “exhale moments” – the point at which a person finally feels a loosening of that knot of dread that has gripped people’s gut since the onset of the economic downturn.

The past several months have generated enough good (if not great) economic news to change many people’s perception, economic experts say. Those people have turned a psychological corner, recognizing that while there is a long climb ahead – and periodic jolts in the stock market – they no longer feel as though they’re being swallowed by a giant sinkhole.

“We’re off the floor,” said Mercer University economist Roger Tutterow.

Or, to adopt Miller’s personal economic indicator: “I can now get my toenails done.”

The collective psychological shift could have major economic consequences, as people’s spending habits are often driven by their view of the economy, said James MacKillop, associate director of the University of Georgia’s Owens Institute for Behavioral Research.

“Certainly a lot of economic activity is predicated on optimism or pessimism,” he said. “You don’t throw yourself into a 30-year mortgage if you feel that things are unstable or that the future is perilous.”

For today, though, the change in perception has yet to translate into a major change in behavior, said Dorsey Farr, a partner in the Atlanta investment management firm French Wolf & Farr. Even though consumer confidence has grown, consumer spending continues to “muddle along,” he said.

“People feel a little bit better, but it is not showing up in a real significant change in personal spending,” Farr said.

That’s likely because much of the pain caused by the recession is still very much with us. Millions of people are still beset by long-term unemployment, depressed housing values and the residual effects of foreclosures, bankruptcies and government spending cuts.

Marsha Belflower has heard the good-news stories, but she’s hardly optimistic.

During the pre-recession boom years, she abandoned her career in social work and eventually opened her own spa. As the economy worsened, business drained away. Two years ago she started looking for another job, but the search so far has been fruitless. Worse, she had to shut down her spa last month.

“I’m kind of a lost lamb,” said Belflower, 39, of McDonough, Ga. “I am taking an emotional sabbatical.”

She can’t even go back to her former career, because many good social work jobs now require a master’s degree that she doesn’t have.

“I do not have the sense that the economy is improving,” she said. “My house is not worth more. It still takes $50 to fill up my two-door Honda. I lost my job and my business. No, I don’t see it.”

Numerous economic indicators, however, show the economy is moving in the right direction, though in fits and starts.

As a result, consumer confidence reached its highest level in five years this month, according to the Conference Board. But don’t get too jazzed: The nation’s other major gauge of consumer confidence, Thompson Reuters and the University of Michigan, recorded an unexpected dip in consumer confidence this month.

The push-and-pull pace of this recovery has created a kind of hybrid optimism, said Emily Sanders, managing director of United Capital Financial Advisers of Norcross.

People see improvement, she said, but can’t shake the lessons of the recession. They see that the local mall is no longer a ghost town, they see houses being built again, but they’re not ready to splurge on major purchases.

“You don’t hear anybody talking about ‘staycations’ anymore,” said Sanders, referring to the term used for stay-at-home vacations. “People are not staying home, but they may not be taking as expensive a vacation as before.”

People make all kinds of decisions based on the economy, experts say: whether to get married, have kids, get divorced. Entrepreneurs gauge the economy when deciding whether to start or expand a business.

Peera, having seen the real estate market in his neighborhood improve, decided it was time to launch his own marketing business.

“I thought maybe I could make more opportunities for myself, instead of waiting for other people to create opportunities for me,” said the 24-year-old, who is now living in Tucker, Ga.

Tilt, after hearing more optimism among her small-business peers, decided to add another employee to her Marietta, Ga., communications consulting firm.

“That is a big leap,” she said. “It is very personal for me if I bring someone into the company and I become responsible for their income.”

Some economists suspect that the exhale moment is less about a surge in confidence than about people simply adjusting to a new normal. Farr, the investment manager, is one.

“The experience of dramatic declines in asset prices, home values and negative economic reports is far enough in the past; it’s faded from people’s memory banks,” he said. “They’ve become accustomed to these conditions.”

But Tutterow, the Mercer economist, believes hope is alive and well – enough, perhaps, to revitalize consumer spending and even revive the region’s aspirations.

“Collectively, the community’s confidence is coming back,” he said.

Copyright © 2013 The Atlanta Journal-Constitution (Atlanta, Ga.) Distributed by MCT Information Services.

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