Dave on March 3rd, 2009

household_debtThis graph summarizes the consumer pressures that are likely to dampen the U.S. economy long after the credit crisis and Wall Street gridlock is behind us. As the graph shows, median household income has been flat for years despite rising household spending and skyrocketing household debt.

In five earlier posts, I reviewed the evidence of economic climate change:

This recession is structurally and dramatically different than the other five recessions of the past 35 years.

Even before this recession began, job creation and real median household income had already flat-lined.

To compensate, Americans worked longer hours and took on massive amounts of debt, fueled by low interest rates, soaring housing prices, and easy (often negligent) credit.

The implosion of this housing bubble, combined with the global credit crisis, suggests “the most likely outcome is not a V-shaped recovery (which is the current official consensus) or a U-shaped recovery (which is closer to the private sector consensus), but rather an L, in which there is a steep fall and then a struggle to recover. (Baseline Scenario)

In the final post of the series, I discuss adaptation and opportunity by connecting the large-scale economic impacts we’re going through to the five basic recession strategies available to your enterprise.

Links to the Economic Climate Change series:
Past recessions | Jobs and income | Consumer spending & debt | Non-consumer factors | Adaptation & opportunity

One Response to “Gauging Economic Climate Change: Wrap Up”

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