We’re Spent By David Leonhardt

The past week brought more bad news. Retail sales in June were weaker than expected, and consumer confidence fell, causing economists to downgrade their estimates for economic growth yet again. It’s a familiar routine by now. Forecasters in Washington and on Wall Street keep saying the recovery’s problems are temporary — and then they redefine temporary.

If you’re looking for one overarching explanation for the still-terrible job market, it is this great consumer bust. Business executives are only rational to hold back on hiring if they do not know when their customers will fully return. Consumers, for their part, are coping with a sharp loss of wealth and an uncertain future (and many have discovered that they don’t need to buy a new car or stove every few years). Both consumers and executives are easily frightened by the latest economic problem, be it rising gas prices or the debt-ceiling impasse.

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