Thursday, June 4, 2009

Is this the frugal generation?

20 and 30-somethings. The real question is: is the household delveraging process sustainable, i.e., will the overly indebted continue to increase saving in order to pay down debt burden? Honestly, who knows? Right now, people are scared. To be sure, the days of the 0% personal saving rate (yes, the quarterly personal saving rate was 0.2% as recent as last year) are probably over, as lending standards tighten across the board and government regulation is likely to secure some lower bound on credit flow. But has consumer behavior taken a discrete shift? Will generations to come save more in the wake of this crisis?

From the LA Times:
Michael Van Gorkom was laid off by Yahoo in late April. He didn't panic. He didn't rush off to a therapist. Instead, the 33-year-old Santa Monica resident discovered that being jobless "kind of settled nicely."Week one: "I thought, 'OK . . . I need to send out resumes, send some e-mails, need to do networking."

Week two: "A little less."Every week since: "I'm going to go to the beach and enjoy some margaritas."

What most people would call unemployment, Van Gorkom embraced as "funemployment."

While millions of Americans struggle to find work as they face foreclosures and bankruptcy, others have found a silver lining in the economic meltdown. These happily jobless tend to be single and in their 20s and 30s. Some were laid off. Some quit voluntarily, lured by generous buyouts.Never heard of funemployment?
RW: Are you scared yet? I am. This is a very different picture than the one painted a couple weeks ago at the LA Times, where research indicates that unemployed individuals shift their work hours to productive non-market activities rather than leisure time....
Here's Urban Dictionary's definition: "The condition of a person who takes advantage of being out of a job to have the time of their life. I spent all day Tuesday at the pool; funemployment rocks!"
Of course, we could be seeing some healthy saving principles here. These 20 and 30-somethings saved enough money for that "rainy day" while they were working in order to consume when the income stream went dry....

Oh, and there is more....A video at Slate.com describing the booming Gaming industry (i.e., video games) as a way for families to spend less by playing games together. What ever happened to taking a hike, riding bikes, going on a walk, picnicking?

Rebecca Wilder

4 comments:

  1. Rebecca - video games are just the modern equivalent of Monopoly, Cluedo, Scrabble, German Whist and whatever else we used to play in families decades ago.

    To sound-off just a tad more, I strongly feel frugality is -it-. We need frugality to allow the developing world to catch up with us a bit, whilst giving time for what I'd call "technoilogy" to develop, otherwise a premature return to growth will promptly get stymied by rocketing energy prices.

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  2. "video games are just the modern equivalent of Monopoly, Cluedo, Scrabble, German Whist and whatever else we used to play in families decades ago."

    I don't have children, but even if I did, I would not allow them to spend much time on the video game console. Most of the time I see people (even children) playing video games, it is NOT with their families. It's way too early to take Monopoly out of the picture - have you been down the game isle at Target lately? Still demand for the product.

    Thanks for the comment, Stevie. Rebecca

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  3. I've wondered the same thing.

    First, I think the older groups will save, regardless. They are worried. If you find yourself in your fifties, with a mortgage, I think you are going to be thinking carefully about how you use your money.

    I am not sure about the younger people.

    I am sure that US tax rates must go up, so spending as a proportion of take-home pay will go down. If taxes and saving both rise, we could be looking at a very different US!

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  4. Hi Maxed Out Mama,

    You say: "First, I think the older groups will save, regardless. They are worried. If you find yourself in your fifties, with a mortgage,"

    It seems to me that the 65 and older (those who are retired) are simply going to spend....or take out a reverse mortgage. But you are right, the 50-65 age group will likely work longer and save more. However, that all depends on how quickly financial markets improve.

    Thanks for stopping by - and I really liked your piece today about the labor market.

    Rebecca

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