Are people making the crisis a bigger deal than it is?

It is a strange thought to have, but is this economic crisis as bad as we think? A FOX News report states that we are in the midst of the deepest recession since World War II and are in the aftermath of a meltdown that has left Wall Street gun-shy. But I was having a discussion with a salon worker on Friday and she disagreed with this assessment. She said that she has not seen a drop in her income from clients. She said people have continued to come in for treatments now that the weather is turning toward summer just as they usually would. She even said she waited in a long line at Starbucks as usual, when people could be saving money if they really needed to instead of buying $5 coffees.

Some people are still buying their luxury items, which is good actually to keep those industries in business. We don't want all business to fail and make the economic situation worse than it already is. Yes, car purchases and cell phone purchases are slowing, as I have stated in previous blogs. But, the items the salon worker was talking about were comforting to those people. A pedicure or manicure can make a woman feel better, for example in Legally Blonde. I know its a silly reference, but maybe in a time where the stress level is high, comforts such as manicures and getting your hair done make you feel better about yourself.

It is hard to argue that we are not in an economic crisis when you read facts such as a loss of 663,000 payroll jobs in March. March is the 15th consecutive month-to-month decline in payroll jobs, the fifth straight month in which payrolls have dropped by 600,000-plus jobs. Also, the unemployment rate increased to 8.5% -Job Report Sources estimate that things will only get worse, since cutting hours and wages are just the beginning to companies trying to improve their financial situation before cutting workers altogether, which we have also seen happening. The cutting of wages reduces income, which then reduces consumption, which also hurts the economy.

Its good that people aren't cutting out too much of their spending, so consumption doesn't fall too much further to hurt the economy more. But its also important that people are smart with their money and use it to pay their mortgages and bills. Because the ones hurting the most in the crisis are the banks trying to help people with loans because of their poor spending decisions. If these continue, the banks will be worse off as well. Many people have money tied up in banks, which could also cause more panic.