Recession alters cultural fabric, economist says

Recession alters cultural fabric, economist says

November 19th, 2009 by Amy Williams in Business Around the Region

Economist Bob Allsbrook predicts the effects of the recession will be felt for decades to come.

Major social changes driven by the recession will lead people to abandon the "keeping up with the Joneses" mentality and instead adopt more frugal behaviors such as shopping at discount stores and sending their children to public school.

"Because we've changed our values, it is going to change the economy going forward," Mr. Allsbrook said.

Mr. Allsbrook, chief economist for Birmingham, Ala.,-based Regions, spoke to a group of more than 100 of the bank's clients and guests Wednesday morning at The Chattanoogan hotel.

As a result of changing attitudes toward spending, Americans will begin to save more and use their income to pay down debt. All of this adds up to slow growth for the nation's economy over the next 10 years, he said, in the range of 2 percent to 2.25 percent.

"Because we are forced to save more and we are forced to reduce our debt, that means those two engines of growth are gone, therefore the economy can't grow the way it used to," he said.

Michael Mathis, city president for Regions in Chattanooga, said Mr. Allsbrook is a favorite among the bank's clients because of his insight and experience.

"He talked a lot about consumer behavior," Mr. Mathis said. "We are becoming a society of savers."

As social attitudes change, businesses that provide services and products people need will do well, including auto parts manufacturers and other companies that make replacement parts, Mr. Allsbrook said. Consumers are foregoing expensive cars and clothing, opting instead to reach back into their closets for last year's sweater.

"There is no longer a social stigma to be seen at Walmart," he said.

And consumers' attitudes will continue to be poor as long as unemployment remains high, he said. Currently at about 10 percent nationally, unemployment should peak in the early spring, then stay there until this time next year.

"Consumer confidence is tied to jobs," he said.