Consumption Rate Studied : Taxes, Housing, Credit, Debt etc.

When a person looks at a government figure like the unemployment rate of 5.1%, it begs the Hillary Clinton now famous saying, "we have to suspend disbelief", and all the while digesting these figures in the face of those not in the work force, standing at more then 94 million, and food stamp recipients at more the 48 million, what is the truth?

Who actually are the consumers? The productive? The unproductive or both? Subsides for everyone?

What is the real state of consumption among the population as a whole? Why do we believe anything that comes from our progressive socialist democrat government? At what point do we say we need a total change in government or we are not going to be able to have a future for ourselves or our children?

The Rise and Fall of Consumption
Source: Yuliya Demyanyk et al., "The Rise and Fall of Consumption in the '00s," Federal Reserve Bank of Boston, October 16, 2015.

November 2, 2015

In the first decade of the 21st century, consumer spending varied considerably; the causes of these fluctuations are still imperfectly identified. During this period housing wealth reached historic highs of $20.7 trillion but fell to $16.4 trillion in 2011. Foreclosures rose from fewer than 800,000 in 2006 to 2.4 million in 2009. The capitalization of the S&P 500 index dropped from about $13 trillion at the end of 2007 to about $7.8 trillion in 2008.

Consumption growth during the 2001-2012 period correlated with income, unemployment, debt, income inequality, consumer expectations, housing wealth, access to credit, cash-out refinancing and foreclosures.

Unemployment variation has the largest explanatory power for consumption.
Optimistic consumer expectations were important during the subprime boom.
Housing wealth was an important determinant of consumption in the subprime boom and during the Great Recession.
The fraction of subprime borrowers significantly predicted consumption growth during the subprime boom.
Debt overhang was very significant in the dot-com recession but had a lesser role in other sub periods.

Overall, many of the patterns found are specific for certain sub periods. Nevertheless, income, debt overhang and unemployment significantly influenced consumption in all sub periods.