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Archive for Wednesday, August 4, 2010

Recovery falls to thrifty consumers

August 4, 2010

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— American shoppers are being careful about how much they spend, and that’s making businesses cautious about hiring.

For the economic recovery to gain strength — and the unemployment rate to come down in any meaningful way — consumers will need to become less frugal.

But a flurry of data released Tuesday suggests families are reluctant to increase their spending, even as they buy more stuff, including cars and consumer staples like razors and shampoo.

“Once the unemployment rate starts coming down in a significant way, consumers will feel more confident and start spending. But businesses are reluctant to step up hiring until they see stronger demand,” said Chris G. Christopher, senior economist at IHS Global Insight. “It’s a Catch-22 situation.”

Unemployment stands at 9.5 percent. The government’s next jobs report comes out Friday.

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