As a business owner, Dave Goodrich has seen far better times, but this year has been better than last.
The owner of a Gainesville discount home improvement store, Dave’s Goody Barn, Goodrich estimates business is up by 40 percent in the first five months of 2010, compared with the same period last year.
“You get people back to work, and people are going to spend what they make,” Goodrich said. “But I think it will still be a long haul, if we ever get back to where we were. We’ve had it so good for so many years.”
Spurred by job growth, consumer spending in the first quarter of 2010 grew by 3.2 percent, the biggest percentage gain in three years, according to the Commerce Department.
Economists expect the rate of growth to drop through the rest of the year to around 2 percent, but it still means cash registers ringing more for goods and services.
“The first quarter may have been a high-water mark for the year as far as growth, but that doesn’t mean consumer spending will decline, it will just increase at a slower pace,” said Jeff Humphreys, director of the University of Georgia’s Selig Center for Economic Growth.
Humphreys said American consumer confidence has been stalled of late by the European debt crisis and flat stock market.
“But on the positive side, we’ve had job growth ... and that’s why I believe growth in consumer spending will be sustained.”
Humphreys said while production began to expand in the second half of 2009, the country didn’t see any significant job growth until the first quarter of this year.
As a result, consumer spending picked up.
“In some respects, I think the first quarter was kind of a catch-up quarter,” Humphreys said. “I think people had fallen back a little too far.”
Consumer spending still faces the headwinds of stalled confidence and a rising rate of personal savings as baby boomers offset the wealth they lost in home equity and the stock market, Humpheys said.
“But I think the tailwinds are stronger than the headwinds,” he said. “And the new tailwind is job growth.”
Humpheys said while job growth numbers haven’t been “stellar,” they have been positive. Georgia’s employment picture will likely lag behind the nation because of the state economy’s heavy reliance on construction and related industries, he said. The rate of job growth in Georgia won’t match the nation’s until sometime in 2012, he said.
In an employer’s market, wages have stagnated with little bargaining power for employees. Increased income and spending power for employees has been dependent on productivity bonuses or overtime.
But hours worked and bonuses are increasing, “and that, coupled with an increase in the number of jobs, is pretty potent medicine for sustained consumer spending,” Humphreys said.
Consumers aren’t expected to loosen their purse strings any more than they already have, however.
“Virtually all the increased spending going forward will be supported by income growth,” Humphreys said. “I’m expecting the purse strings to tighten some, but not enough to choke off the increased spending power coming from income growth.”
Business owner Goodrich said he believes there are more bargain hunters now shopping for what they need, not just what they want.
“(Spending) is coming back slowly,” he said. “I feel it is coming back more rapidly for our business, because of the type of business we are.”