Every year over the Labor Day weekend I cross paths with a large variety of friends, neighbors and family members that happen to cover a very wide socio-economic spectrum. We do the typical things, have the typical chats (especially among those visits that come once a year) and generally have a grand experience. This time though, there was a little something different thrown in: from BBQ’s to skype chats, from book stores to museums and from taco stands to thai food, I kept running across the same story, albeit from different mouths.
They all started the same way ….“Because we didn’t want to spend the money”…or something along those lines.
And, they all ended the same way… “it’s something we look forward to doing (again) after the recession”.
I really shouldn’t have been surprised as the long-tail of the “Great Recession” is hitting us hard. According to the July, 2010 Economic Security Index, 20% of Americans households are facing “utter economic devastation” . This means that there are approximately 62 million Americans “completely out of money, with jobs, savings and retirement funds gone and nowhere to turn for the next dollar”. And, looking at the ESI research as well as new Pew research this group, which includes some of the 23% of Americans who took a significant pay cut in the past two years, will take anywhere between 6 and 8 years to recover to the pre-recession levels of financial security.
And as studies have shown, the long term effects of a recession are ridiculously numerous—from the lifetime barriers the newly emerging work force will face to crumbling family dynamics to the trickle down ‘negenomics’ and a changed consumerism. But it’s always easier to understand the effects of anything when you put a human face on it all. And that’s where we come in on these stories—the personal changes and choices of consumerism by people, whether it is not spending, of not choosing one brand over the other, choosing no brand at all or of finding new ways to spend. More interesting though than the fiscal shifts, is how each group saw themselves, saw the changing event and saw the value in the changes they’d made. And even more interesting? If, or how, these changes and the value seen in the changes will evolve as we either head back towards pre-recession financial security or find ourselves in the midst of a double-dip.
First, the Shopping Trip Redux: In the past, this close group of friends, around 10 ladies, go to New York over Labor Day weekend to go shopping for the upcoming Winter season. Their husbands are at home boating, golfing, etc. and for the women, this is part foodie girls trip, part serious shopping trip. They’ve been known to bring large empty trunks with them to ship their new clothes home. This year though only the three best shoppers are going (all are paying for the trip) and those three are taking much shorter, but seriously complicated lists with them for the other 7. Seriously, these lists look like a con-joint study: If the Manolos are less than X, then get the Aimee and Marie (Aussie designer?) black dress in a size 6, but only if the Cor or Asso soaps are not available. Secondly, this group has started a combined savings program at Smarty Pig for those items they can get later, they buy in bulk, they can get online, or they can’t afford right now. Finally, the three that are going have to take pictures and detailed notes on anything they think the ones left at home will like in place of something on their list, and this information is sent home daily so that they can rework the lists vicariously and get back to the shoppers before the shopping continues. The ones at home are on sites like Rue La La, looking for the good deals for all of them—and then adding them to the SmartyPig list. Finally, they’ll have a big viewing party during Fashion Week so they can all be together looking at fashion and talking about it like they always do…it’ll just be from a couch as opposed to an aisle at Bergdorfs. As one said in the midst of all this craziness, “…we used to have fun being there in NY taking our fashion seriously, but this time, we’ll each get a few pieces and the rest we’ll just look at and sigh…”.
Next, A Very Different Las Vegas. Three couples go there almost every year for a birthday. This year, driving instead of the flying, the Sahara over the Bellagio, Merlin over the Beatles. Which seems on trend, generally. Visitation is supposed to be up 2.8% this weekend over last year, and has been up about 2% since June. But once there, spending is radically different, in fact, gaming revenues fell to $4.5 billion in the year ended June 30, down 7.9% from the previous year and nearly 23% over three years.v And the three couples stayed on trend…typically a group that combines black jack and roulette, this year, like many others, they went a little different and struck the penny slots hard. “We worked those machines like no one’s business…it was fun. We’d play, go watch the black jack and roulette tables, then go back and hit the penny slots some more. We stayed together, played longer and laughed harder”. Other’s seem to be doing the same: gamblers who played penny slot machines produced about one-fourth of all slot machine revenue in Nevada last year, and more in other states. In Missouri, one of few states where gambling revenue rose in 2008, more than half of all casino revenue came from penny slots. For many casinos, penny slots are producing the only kind of revenue that’s rising. One couple summed it up nicely with the husband stating, “I surprised myself. I always had fun playing black jack, but it was different this time sitting at the tables, I couldn’t get comfortable with the amount of money on the table and that I was part of it. I had more fun with my wife at the penny slots.” The wife kicked in at that point, “…watching other people play with big money was just as fun for me this time…I don’t know if I’ll go back to playing myself it seems silly in light of it all.”
Lastly, The Big Trade Off. This is a family of six—four teen girls and two parents. He’s had his hours cut, so he added another job. She’s kept her hours, but took a pay cut and her benefits for the family are more expensive this year. After a really difficult family meeting before school started this year, the girls voted on what they’d like to spend their back to school budget on. Surprising their parents, the girls chose technology over clothes, specifically updated phones and even more specifically, the new iphone. According to Michael Mandel, former chief economist at Business Week and current editor of Visible Economy, this is not surprising. He wrote on August 9th or so about US consumer spending trends in a post on his website titled “Where Americans Are Spending More,” where he showed that Americans do have a bit of ‘thing’ for mobile devices, where spending has soared almost 17% since the recession started whereas spending on clothing and other items continues to trend down. When their mother told them not to come back to them with requests for clothes, the girls took matters into their own hands: first having a hand-me down party amongst themselves, and then amongst larger group of friends and family members. Then to boost their “new” clothes, the girls took advantage of a community clothing swap at the local elementary school where they found both items to add to their closets and manned sewing machines ready to take up, take in or let out or let down. As a family there was sense of accomplishment, a feeling that they got together, made decisions well and tried new things. For the girls they were surprised at how well this worked for them—and their parents. Anna (named changed) who is 16, said it best, “We got the best of both worlds…people can see that we have the same phone that everyone else has and then we had a chance to get new clothes that we were able to play with to make ‘mine’…I didn’t look like everyone else on the first day of school…they all did, they looked exactly the same with the same clothes on and for the first time I saw how that looked and I was excited to look different. And a lot of people liked what I had done with the clothes. It was cool and we did the right thing.” Some may say that value is the new black, but that’s too easy in some ways. I think the real, ‘new black’ is the higher awareness we have of the choices we each face, the trade-offs and the sacrifices made when it comes to our finances now and as we face what comes in comparison to how we acted before and how those around us are acting.