"It’s no relation to the meaning of life … It’s a dang fool husband doesn’t spring for his wife." — from "Spending Money," as performed by Jimmy Buffett


Let’s take a look back and a look forward at our economy in this, our last column of the year.


Casual observers notice holiday shoppers spending and hear cash registers ringing and many assume that this is a sign of a healthy economy. The day after Thanksgiving, Americans spent an approximate $7.4 billion online, or almost 20% more than last year. Cyber Monday saw even greater online spending, at $9.4 billion.


So retail holiday spending looks healthy and consumer confidence is currently high. Also, the unemployment rate, at 3.5%, is the lowest in 50 years.


Now, let’s consider some sobering facts. In two of the last three recessions, the Bloomberg Consumer Comfort Index was close to its peak in the month the recession began. Consumer willingness to spend is, alas, not a leading, but a lagging indicator of economic health. As Karl Smith writes in Bloomberg, "Business cycles are driven by investment in housing and business. By the time consumer spending begins to weaken, it is too late."


Truth is, growth in consumer spending reached its zenith about 18 months ago and has been in a gradual decline since.


No Goldilocks economy lasts forever. And no bull market runs to infinity. Recessions will return, it’s just a matter of when. Not a cheery holiday thought, but we all have short financial memories. They call them business cycles for a reason.


Now here's some relatively good news. Our next slowdown and even our next recession may be less severe than in the past. Why? Because the economy isn't growing as fast as it used to.


That sounds counterintuitive, but here’s what we mean. When the economy is growing at 5%, and then actually shrinks for two quarters (the definition of recession), it’s a very noticeable pullback that has implications for consumer spending and investment. But when the economy is growing at a much slower 2% (which is the Atlanta Fed’s current "GDPNow" reading), then shrinks for two quarters, it’s not nearly as noticeable or damaging to consumer confidence. The difference between growth and decline is a lot smaller.


The "old school" manufacturing-led recessions may be less relevant in a world where services comprise a larger, more stable component of the economy. The "perfect storm" of events leading into 2008 (a 5.1% peak-to-trough decline in GDP, the biggest drop since the recession of 1945) notwithstanding, our next decline may be less severe than past recessions. Will folks cancel Spotify or Disney+ subscriptions just because the economy is pulling back a bit? If they’ve lost their job, perhaps, but probably not otherwise.


Japan has been in and out of recession for decades, but most people living there don’t seem to notice. Their growth is so persistently low that most people don’t adjust their lifestyles or spending levels much during economic pullbacks.


Margaret R. McDowell, ChFC, AIF, author of the syndicated economic column "Arbor Outlook," is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a "fee-only" registered investment advisory firm located near Sandestin.