Don’t bet on the consumer

All this green shoot talk and pronouncements that the worst is over fails to take into account the sorry state of the US consumer. Sure indicators may be turning (are they really?) but the fact remains that the US consumer, the same people responsible for 70% of our nation’s GDP are still in a world of hurt. Below are an amazing set of graphs that show how much of the consumer-class wealth was eliminated over the last year and a half (22%) and how much debt the consumer is carrying (128% debt-to-income ratio).

These factors don’t portend a speedy or vibrant recovery. When 70% of the economy is still fundamentally hurting, the rest of the economy can’t do much in terms of coming around.

And there isn’t really any clear path out of this. Wages are dropping, total employee compensation is dropping, the average consumer isn’t earning enough to keep up with their debt load.

Until the consumer issues of debt are resolved we will have no recovery.

See more incredible graphs from the Huffington Post (all graphs from HuffPo):

When economist David Rosenberg left Merrill Lynch to head back to his native Canada, he gave a nod to Bob Farrell’s Ten Rules To Remember by penning his own. They are both keepers. Among the most important of the rules Rosie laid down, in my opinion, is #12: Get the US consumer right and everything else will take care of itself. The reason is fairly simple: The U.S. consumer has the biggest balance sheet on the planet. The U.S. consumer represents 70 percent of our GDP and about 18 percent of global GDP.