Unconventional

Reading about upticks in pre-Christmas sales, better new car and home sales, small but continuing declines in unemployment numbers here in the United States suggests that there is a recovery afoot. Perhaps, but when you dig into the numbers, what we are seeing may instead be Americans getting used to the “new normal,” a giant downward reset in our hopes and expectations. New home construction, for example, has taken 300 square feet away from the average size of homes from a decade ago (unclutter.com). Home sales for average residences are tied to the tiniest fluctuation in mortgage rates, which in turn suggests that when interest rates settle at their inevitably higher level, we may well see a mini-bubble bursting, taking down home values once again.

I’ve blogged about the kinds of jobs that Americans are, in larger numbers, getting in this new marketplace, and the trends are for work at the bottom of the pay scale, often contract or part-time work. We know about the millions who have given up looking for the kinds of jobs they trained for, were schooled in, and even had for years… some giving up looking altogether. Corporate America has downsized and implemented big cuts to operational costs, sending the stock market soaring. Government cuts, highlighted by the recent sequester, have also placed austerity at the fore.

Looking at the tea leaves again, there is one symbolic segment of our economy, hospitality that caters to conventions and larger gatherings of business or government groups, that provides one of those examples of this reset. Big meetings at hotels have for the most part been replaced with smaller and less frequent gatherings. “‘Meetings that require fewer than 25 rooms per night now account for 70 to 80 percent of conference bookings,’ [said Sherry Romello, senior director of Hilton Meetings and Product Management].” Washington Post, November 24^th. They are often last minute affairs, taking away that dependable long-term planning ability, requiring more staff who can act nimbly and quickly. And there is a careful eye on costs.

The overall convention-booking numbers don’t reflect this change, but there has indeed been an overall slow but steady downward trend: “Nationally, group business continues to decline. In September, for example, the group occupancy rate fell to 23.5 percent, down from 23.8 percent last year and 24.4 percent two years ago, according to research firm Smith Travel Research.” The Post. Adding to this mix is a new body of “meeting only” facilities – from banquet halls to shared meeting facilities, even movie theaters with daytime/weekday availability that competes with the local hotel chains. Prices haven’t been this competitive for decades.

The difficulty for economists is to separate nascent signs of recovery, auguring for longer-term prosperity, from evidence of a big reset, one in which Americans will continue to see an erosion in their discretionary income (which has been continuous for well-over a decade). It may be part of a bigger shift in overall growth patterns from the developed Western world to the mega-economies in Asia, Latin America and even Africa.

I think there are very few of us in the West who would argue that our children will live better and more economically advantaged lives than their parents. Even the cost of a good college education, with a parallel available parcel of affordable financial aid, is drifting out of the sightlines of too many families. We keep our cars for more than a decade these days (who remembers a new car every two years?), and the demand for new vehicles may be nothing more than a reflection of necessity rather than conspicuous consumption. Times are hard… and they may just stay that way.

I’m Peter Dekom and getting used to this new normal may be the undercurrent that in significant part powers the severe polarization we see in our political scene.