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Todd Harrison: America has entered 'modern' depression

Todd Harrison

Todd Harrison

The friction between perception and reality is where profitability is found. Looking forward, we can apply that lens to two dynamics that will soon vie for our collective attention: consumer spending and unemployment.

There are two types of frugality: involuntary thrift (you can’t afford subway fare or a Subway sandwich) and voluntary thrift (you opt to skip floor seats at the Garden). At the height of the financial crisis, these crosscurrents collided in spectacular fashion.

Since that time, we’ve witnessed a divergence: The wealthy set has again spent, although many have done so in a discreet manner; however, those less fortunate — many of whom were the former middle class before it was outsourced — continue to struggle. The resulting dichotomy is akin to a modern stealth depression.

The causal factor for this divergence can be traced to the job market. While the Bureau of Labor Statistics maintains that the unemployment rate is hovering around 9 percent, it’s missed the mark in more ways than one. I understand employment is a lagging indicator coming out of any recession, but I’ll share the following fare:

-- The “underemployment” rate, which includes those who’ve taken a part-time job to make ends meet or stopped looking for work altogether, is 20% (one in five).

-- The unemployment rate for 16- to 19-year-olds is 25% (one in four).

-- The unemployment rate for 20- to 24-year-olds is 15% (one in six).

-- And perhaps most eye-popping, 15% of Americans are on the food stamp program (one in six!).

The most important takeaway from the evolving shift in social mood is this: Identifying a personal balance isn’t just about living within one’s means — it’s about redefining what those means are, adjusting the boundaries and embracing voluntary thrift.

If the ’90s were about wealth, accumulation and consumption, the next five years will continue the mean reversion toward something altogether more austere, if not more sensible.

My personal view is that the stock market could retest its March 2009 lows in 2013, but that doesn’t make it right. The goal isn’t just to position yourself to profit if you’re right — it’s to persevere if you’re not.

Debt reduction and the rejection of — and guilt projection toward — materialism will continue what began in 2008. It won’t just be about doing more with less, but doing less, period, and finding happiness through avenues other than money.

Todd Harrison is the author of “The Other Side of Wall Street” and founder and CEO of Minyanville, an Emmy Award-winning financial media platform. Read him daily at


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