By Jennifer Waters
RISMEDIA, October 24, 2009—(MCT)—Women are increasingly reining in spending and promising that their new frugality is here to stay—a vow that, if followed, could throw a wrench into the economic recovery.
Women with children overwhelmingly told researchers in a recent Citi poll that their spending and savings habits have changed “forever.” Though most surveyed were optimistic about the economy over the next year, women in every income category said they were curtailing purchases on major items as well as everyday needs.
“There’s a lot of reset going on in terms of returning to the basics,” said Lisa Caputo, chief executive of Citi’s Women & Co., a financial-resource program aimed at women. “Women are looking at this recession in very personal ways.”
Seventy-five percent of mothers, both single and married, said savings and spending habits will never go back to pre-recession levels, while 61% of women without children said that, as did 60% of men.
When it comes to being forced to dip into savings and investments to cover bills, mothers widely outnumbered women without children—62% compared with 52%—as well as men, at 39%. About 63% of women with children are holding off buying big-ticket items like a car compared with 50% of women without children and 52% of men. “Women across all sectors believe that their financial situations have deteriorated,” Caputo said. “They are not going to be high-flying consumers with open pocketbooks.”
Caputo said women, who have long been considered the CEOs of their households are now also taking on the role of CFO. “We are seeing a huge transition of women from just family organizer to chief family financial officer. This has become a transformational recession for women.” If women keep their word about never returning to the spending habits that helped pull the U.S. out of previous recessions, then the economy’s recovery is in for a long slog.
Women already account for some 80% of household spending. That number could rise if the percentage of women in the workforce reaches parity with or marches higher than the portion of men. Already, this recession has been dubbed a “mancession” because a higher portion of men than women are unable to find jobs. Still, women’s pay is still well below their male counterparts—women average about 78 cents for every dollar a man earns. Given those particulars, plus higher rates of savings and debt reduction and the survey’s findings that frugality is here to stay, the picture doesn’t look good for consumer spending, and in turn, an economic recovery.
But what consumers say and what they do are often two different things. Carl Steidtmann, chief economist at Deloitte Research, isn’t buying the “forever” scenario. There are signs that the economy is stabilizing, at worst and improving at best, he said. Deloitte Research is a subsidiary of Deloitte LLP, the consulting firm. The stock market surpassed the psychological 10,000 mark recently, returning some 60% of wealth back to investors since March. Jobless claims are falling, signaling that companies are not as quick as they were a few months ago to cut labor costs, and retail sales—minus autos and gas—inched up 0.5% in September 2009 after a 1% gain in August.
Deloitte’s Consumer Spending Index, which uses tax burden, initial unemployment claims, real wages and real home prices as measures to track consumer cash flow as an indicator of future consumer spending, climbed to its highest level in two years last month. September registered at 3.44% after an upwardly revised gain of 3.08% in August. Those are signs of recovery that Steidtmann said can’t be overlooked.
And if history tells any story, he said, it’s that once the hard times are over, the parties begin again. “Throughout the history of the United States, consumers go back and forth between Puritanism and hedonism,” he said. “During recessions and depressions, Americans tend to act like Puritans. Eventually they have Puritanism fatigue and they go back to what they were doing before.”
Heidi Hartmann, president of the Women’s Institute for Policy Research, agrees but notes that women’s current attitudes toward spending won’t go away overnight. In other words, spending habits will be “permanent until they get more money again,” she said. “This idea that consumers are going to spend less, pay off debt and save is something that will slow down the recovery, but that’s not necessarily bad,” she said. “It’s just the way it is.”
(c) 2009, MarketWatch.com Inc.
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