Page 75 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

survey. Ostentatious consumption is shunned even by those who
can afford it. Fewer people have the enthusiasm or the confidence
to trade up. And the chances of consumers returning to their old
ways anytime soon look wildly optimistic. As Bond puts it,
“Anyone waiting for things to get back to normal is mad.”
The executives we surveyed recognize this—90 percent iden-
tified this shift in consumer behavior as the primary challenge
facing their company and industry. The new normal will indeed
be quite different from the old one.
And this shift will be exacerbated by the severe unemploy-
ment we are witnessing in many countries. In the United States,
for example, the headline rate of unemployment of just over
10 percent does not paint the full picture. When we consider
that the length of the workweek has been reduced for many
jobs, more part-time jobs have been added, and many workers
have given up looking for work, the real figure may exceed 16
percent. Consumers out of work, on reduced pay, or nervous
about their jobs are unlikely to be confident spenders.

Consumers Will Have to Work Longer

Before the crisis, most consumers had already begun to expect
that they would have longer working lives than their forebears
owing to increased life expectancy, the inadequacy of pension
provisions in many countries, and shifts in demographics. Now,
they have also come to realize that the combination of fallen
property values and much tougher credit terms means that their
homes can no longer be relied on as a source of constantly
increasing value. Moreover, for those who are nearing retirement
today, the drop in stock market values has eaten into their already
inadequate pension pots. No wonder that the group aged 50 and
above is currently gaining share in the U.S. labor market: they are

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