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As a Consumer, You Know You Are in a Recession When…
August 12, 2010
Many economists spend their lives analyzing, prognosticating and predicting when economies will go into a recession. Today, much talk centers around whether the U.S. has regressed back into a second recession. These economists wave around arcane statistics, like sorcerers trying to conjure a spell. To the vast majority of consumers, what they say may as well be a spell. It seems to make no sense.
One group argues that the economy has merely hit a soft patch, but continues to grow. Others say that there is a pronounced slowdown, and the risk of deflation has begun to rear its ugly head, again. Still, others say that the economy has begun to contract, again, bringing with it all the perils associated with such a recession. No matter what they say, it is hard for the average consumer to understand what is happening, to the world around them.
We thought we would take the wizardry out of economics. Listed below, are 10 warning signs, showing you’re in a recession.
1.) The company you work for has frozen pay increases, for the next year. There may have been some layoffs, as well. There are rumors, among your co-workers, that a round of layoffs is in the offing. You’re afraid to ask for a pay increase, greater than 2%.
2.) Your next door neighbor’s house has been foreclosed. He has been living rent-free, for the past 6 months, courtesy of his mortgage foreclosure. He and his wife plan on renting a house down the street, which is already owned by the bank, and is vacant.
Originally, the vacant house's rent was listed at $1,800, per month. Your neighbor will be renting it for $1,500, starting next month. The rent will be half the cost he was paying on his mortgage, insurance, and property taxes, for his foreclosed house. The new rental has an additional bedroom and a newer kitchen.
3.) Your friend sends out a mass email letting everyone know that he was laid off, last week, from his job. It is a white collar job, as a computer operator. He was employed at the same company, for 14 years. His entire department has been partially automated, making some of the work redundant. The remainder of the department is getting outsourced to India, next month. The remaining 35 workers have been given the required notice that their jobs will be eliminated, within 60 days.
4.) Your cousin called you the other day. He’s canceling golf. Normally, you go with him every weekend. However, over the last couple of months, both of you have been steadily cutting back. Until now, the golf course visits were monthly.
Your cousin owns a small restaurant, near the company, where your friend used to work. Because of all the layoffs, at the company, your cousin has been forced to reduce wait staff and bus boys. Also, He has seen that more and more of his regular customers are walking into their offices carrying lunch bags.
5.) Your spouse called from the shopping mall. Your favorite store is closing. They’re having a storewide liquidation sale. The television, which you have wished to purchase, for over a year, is now 50% off of the original price. Your spouse asks if you wish to purchase it. Three months ago, you would have jumped on the deal and charged it. Now, you hesitate. Ultimately, you turn it down.
6.) You open the mail. Your property tax bill arrives. It has increased 21%, over last year’s total. You’re shocked! Included is a letter of explanation. It states that, although property prices have declined, over 20%, in the last year, the assessor’s office uses a 3-year, rolling average. You quickly do the math and realize that property prices have been declining, since 2007...3 years. Why the increase? You read further. You realize that they have increased the actual tax rate, by 40%, to make up for the lost funding, from the state. It’s a good thing you did not purchase that TV!
7.) Continuing to go through the mail, you receive a letter from your credit card company. Even though you have never missed a payment, the credit card company is cutting your credit line, in half. They claim that, upon further review, of your credit card profile, they felt the need to cut the credit line.
8.) Your son comes home from school. You ask him how his day was. He complained that he’s having a hard time keeping up with the class lessons. Now that there are 35 other kids in his class, the teacher does not have time to help out all of the students. So many kids raise their hands, to ask questions, that she can only get to a couple, for each lesson.
You’re in disbelief. You just got a huge property tax bill, yet your kid is not getting the educational attention he deserves ,and you pay for every year.
9.) Your company called. They asked if you can come in on Saturday to work. Already, you have worked a 60-hour week. You’re tired and irritable. Since the last round of layoffs, you’ve been saddled with all of the work, of your normal job. However, you and your co-worker have had to take on the work of a laid-off colleague. You feel resentful, because you are considered an exempt employee, and are not getting paid for any hours, over 40. Reluctantly, you agree to come in on Saturday, and work another 12 hours.
10.) Finally, you sit down to dinner, with your family. Everyone looks tired and irritable. Not much conversation will happen this evening. Your spouse brings out the main dish – meatloaf. It’s now the 2nd night this week that meatloaf is on the dinner menu. The local grocery store had a sale on 85% lean ground beef. It was only available, in the bulk-package size. The meatloaf doesn’t taste as good as it used to, when the meat was ground sirloin, and less bread was added.
However, you have no choice. After the increased state income taxes were taken out of the non-inflation, adjusted paycheck, and after budgeting for a bigger property tax payment, there is no more money. It’s a tough life. At least your job and your spouse’s job have not been cut. If either were, it wouldn’t be a recession. It would be a depression.
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