The savings rate ticked up to 4.6 percent last year from 2.7 percent in 2008 as fears about joblessness forced consumers to stow away more cash for hard times, and banks and consumers cut back on credit-fueled spending. Credit card debt, home equity loans and other kinds of credit that spawned robust growth in consumer spending in the past shrank during 2009 and will continue to decline this year, economists said.
As overstretched consumers continue to pay off debt and build savings this year, Mr. Silvia said, spending will simmer down to an average 1.4 percent growth rate — anemic by historical standards.
He sees a darker side to the business spending surge on equipment and software last quarter. Rather than foreshadow a return of hiring, he said, businesses during the recession used such technology investments to help cut labor costs, since in some instances workers’ output can be replaced by using more sophisticated equipment. Labor costs, including wages, health care and pensions, remain the single biggest expense for the vast majority of businesses.
Many U.S. companies stayed afloat and even managed to be profitable last year because of this aggressive cost-cutting, accompanied by drastic layoffs. Adding to this underlying trend, Mr. Silvia said, was the congressional threat of new mandates for health care coverage that would add to labor costs — making businesses even more reluctant to hire.
But Congress’ actions early last year to provide $862 billion in stimulus spending on health care, education, infrastructure and jobless benefits did provide some help to the economy, which peaked with an 8.1 percent surge in federal nondefense spending in the fourth quarter, Mr. Silvia said.
“The longer-term challenge for the economy” lies in the aftermath of the stimulus, he said. Congress is considered likely to extend jobless and health care aid in coming weeks, but much of the rest of the stimulus is scheduled to expire this year.