Just when it was starting to seem as if consumers were really shaking off high energy prices, Wal-Mart announced this week that its profits stumbled in the second quarter, rising at their slowest rate in four years. Forced to choose between their closets and their gasoline tanks, Americans unsurprisingly chose their tanks. Wal-Mart warned that future sales would be curtailed as well, and no wonder: gasoline is now averaging $2.60 a gallon nationwide, nearly a 39 percent increase from last year. At the same time, natural gas prices are up 60 percent to 90 percent around the country, presaging steep home-heating bills in the months ahead on top of high prices at the pump.
With most other prices relatively tame, consumers could weather the energy squeeze if they had a cushion. They don't.
Wage gains for most Americans are barely keeping up with inflation. And according to a recent Commerce Department report, Americans, on average, are now saving nothing each month, so they obviously cannot pay higher energy bills by reducing the amount they save.
<snip>< Discussion of the "wealth effect" of the housing boom on perceptions of wealth and disposable income
The pain that now seems imminent might have been avoided. Conservation could have reduced energy demand and prices, while properly targeted job growth and savings incentives - not tax cuts for the rich - could have built a stronger job recovery, helping to foster higher wages and new savings. Maybe next time around.
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