How Long Can the U.S. Consumers Carry the Economy on Their Shoulders?

The Levy Economics Institute Working Paper No. 380

43 Pages Posted: 16 Jul 2003

See all articles by Philip Arestis

Philip Arestis

University of Cambridge - Department of Land Economy; Universidad del País Vasco (UPV/EHU)

E. Karakitsos

Trafalgar Asset Managers Ltd.

Date Written: May 2003

Abstract

The consumer has been on a tightrope since the bursting of the "new economy" bubble, as losses in equity markets have been partly offset by gains in real estate and fiscal support and mortgage refinancing have partly offset increased consumer cautiousness. The consumer will remain on a tightrope in the near future, but if the economy were to stumble, the fragile consumer might contribute to turning the downturn into a deep and protracted recession. There are two risks to the continuation of consumer resilience. The first arises from the fact that this has been a jobless recovery. The second arises from a growing personal sector imbalance that is fueled by the growing property bubble. Hence, the short-term outlook remains uncertain, but the long-term one is bleak.

Keywords: consumption, jobless recovery, personal sector imbalances, property bubble

JEL Classification: E21, E32, E37

Suggested Citation

Arestis, Philip and Karakitsos, E., How Long Can the U.S. Consumers Carry the Economy on Their Shoulders? (May 2003). The Levy Economics Institute Working Paper No. 380. Available at SSRN: https://ssrn.com/abstract=414521 or http://dx.doi.org/10.2139/ssrn.414521

Philip Arestis (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

Universidad del País Vasco (UPV/EHU)

Barrio Sarriena s/n
Leioa, Bizkaia 48940
Spain

E. Karakitsos

Trafalgar Asset Managers Ltd.

London
United Kingdom

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