By any measurement, the United States economy, mired in steep recession since December 2007, has bottomed and has recently shown signs of recovery.
Second-quarter gross domestic product contracted by just 1% after Q1's -6.4%; home sales and construction starts continue to rise; the index of leading economic indicators has risen for 3 consecutive months; major banks and financial institutions have begun reporting solid profits; 70% of Q2 corporate earnings have met or exceeded estimates; monthly unemployment claims are declining precipitously; Wall Street's bull is roaring; and even the comatose auto industry is showing signs of life.
Yet the one critical thing absent in this economic turnaround is job growth. Without it we'll have the longest U-shaped recovery known to man. And the only thing that's going to get America's businesses, both big and small, to start hiring again is when they see a sustainable increase in sales. It's not enough that earnings are stronger. They've come at a huge price: significant cutbacks in operating expense and massive layoffs. But if the economy is to truly expand, it's now the top line that must appreciably grow. And this can only happen if the American consumer stops hoarding cash like squirrels with their nuts and starts spending money on the goods and services of manufacturers and retailers; buying big-ticket items like homes, cars, electronics and vacations, as well as clothing, music, books, etc.
The personal savings rate today is around 7%, while it was at zero just a year ago. Americans are practically stuffing cash under their mattresses like their Depression-era counterparts, still saving for that proverbial rainy day despite the torrential rains having waned and the skies clearing. If this continues, we risk stagflation, when prices rise amid high unemployed and slow growth.
What we need is a more forceful President Obama encouraging consumers to loosen the purse-strings a bit. People need to believe in the economic system, but they also need strong leadership, optimism and encouragement. Former President George W. Bush, after the 9-11 attacks, urged Americans to go out and spend money in order to avoid recession. For all his warts, and he had plenty, he wasn't that off the mark. The underlying sentiment was, let's get back to normal. Well, regarding the current economy, already in recession, we cannot get back to normal unless Americans start spending again.
On another note, we could use your help at The The Adrienne Shelly Foundation. We're a 501 c 3 tax-exempt, non-profit organization dedicated in my late wife's honor, and with a simple mission: supporting women filmmakers. Adrienne, who wrote, directed and starred in the hit film WAITRESS, was killed November 1, 2006. Through the Foundation, her commitment to filmmaking lives on. We've established scholarships, grants, finishing funds, screenwriting fellowships and living stipends at NYU's Tisch School of the Arts/Kanbar Institute of Film; Columbia University; American Film Institute; Women in Film; IFP; the Nantucket Film Festival; the Tribeca Film Institute; and the Sundance Institute. Your generous contribution will go a long way towards helping us achieve this very important mission. Please click here to make a donation. Thank you.