Although Yogi Berra spoke the immortal words “It ain’t over till it’s over” in 1973, he just as well may have been talking about the credit crisis that began in the summer of 2008. Americans are desperately searching for signs that the worst of this recession is behind us.
Recent gains in the stock market, an increase in housing starts, a modest increase in consumer spending, and apparent stabilization of the banking system are tremendously positive indicators that sunnier days are ahead. Still, three quarters of North Carolina counties have unemployment rates above 10%, the overall U.S. economy is contracting at a 6.1% annual rate, and March saw the sharpest decline in consumer borrowing ever recorded ($11.1 billion).
Is the recession over? Not quite yet. The economy relies too heavily on consumer spending. Until unemployment levels return to the 6%-7% range, there simply will not be adequate consumer confidence to encourage the outrageous level of spending our standards of living require.
You see, the past ten months have been as much a crisis of panic as it has been a crisis of credit. Panic caused non-mortgage investments to plummet. Panic caused investors to sell assets at rock bottom prices. Panic caused employers to see more risk than opportunity. Panic has cost millions of Americans their jobs and homes.
That said, the worst of the recession likely is over. Instead of panicking, it seems that Americans are starting to come to grips with reality. We are making positive changes in our lives that have been long overdue. A shift towards thrift has been quite pronounced. A recent Gallup poll showed that 36% of Americans have begun saving more in recent months. A full 53% say that they are now spending less money, of which an overwhelming majority claims that this “new frugality” will become their new, normal pattern. Interestingly, 59% of respondents said that they enjoy saving as opposed to spending. Only 37% claimed prefer spending to saving.
We have definitely seen evidence of this paradigm shift here at Members Credit Union. Deposits in Money Market and Super 60 accounts are up markedly as members seek out our high dividends and financial stability. We have talked with many members who have finally gone through the process of looking through their bills, cutting unnecessary expenses, and finding ways to lower their monthly obligations. Our eBill@MCU service, debt consolidation loans, and auto loan refinancing service have been extremely popular with this group. Still others have decided to make large purchases based on value, not flashiness. Our low rate Visa credit card program and partnership with GM and Chrysler to offer huge members-only discounts on new car purchases through the Invest in America program have been popular with this group.
This recession has been painful for many of our members, but these days shall pass. In the meantime lean on your credit union to help you to make positive changes in your financial life. Contact any of our employees for advice on what deposit account, loan account, or savings program is right for you. We cannot control what goes on with the rest of the economy, but we can help you manage your household’s economy.