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Consumers Can't Do It All

November 28, 2003

Now that the turkey and trimmings have been stowed in fridges and tummies, it's time to turn to the other great American sport, besides football: shopping. Today is Black Friday, the day when retailers, traditionally, move from loss to profit.

This, however, isn't the year's biggest sales day, which usually occurs on the Saturday before Christmas when procrastinators finally start spending. But today's sales figures give economists and politicians a gauge of and a glimpse into the all-important consumer psyche. It isn't a faultless measurement; Black Friday sales last year soared by 12.4% but retailers recorded a lackluster 2% holiday increase overall.

The consensus among Wall Street retail analysts is for a moderate 4% holiday sales gain. But the nonprofit Conference Board cautioned on Tuesday that household spending on gifts was expected to slip to $455 from last year's $483, with wary consumers concentrating on bargains.

The board's lowered spending estimate came even as it reported that consumer confidence jumped in November to its highest level in a year. The Commerce Department, meantime, reported that corporate profit rose by 30% and that the nation's output of goods and services grew by a stunning 8.2% in the third quarter -- the strongest gains since the 1980s.

The solid economic news gives President Bush something to be thankful about, but the celebration needs to be tempered. Job creation in the past quarter remained mired at about half of what's normal for a single month at this point in an economic recovery.

Economists also fear that a growing number of Americans simply are splashing red ink all over their financial future, using credit cards and cash wrung from home refinancing to maintain their lifestyles. Household debt, compared with disposable income, is at record levels -- and that could spark a wave of personal bankruptcy filings. The Bush administration argues that tax breaks scheduled to kick in during 2004 will spur continued consumer spending; common sense and scholarly research argue that Americans would be better off using any tax refunds to pay down their debt.

Relentless consumers kept the economy afloat during the painful recession and they have sparked several past attempts at recovery. But they can't keep carrying the burden alone. This week's cheery economic data suggest that businesses are building up piles of cash. They could provide a most welcome holiday boost to all by using that money to start hiring in earnest.

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