"Wounds from the Great Recession still fresh" - Consumers build Cash in their Checking Accounts

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"That weighs on people's minds," he said. "They think, 'If I lose my job will I be out of work for two years?' It's scary."

Worry about jobs remains high.  Inflation is rising.  The economy is different for those below the upper class.

The simple, serious fact is that the economy is of greater worry to most Americans than what the government and media pundits say.  PB
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From the L.A. Times online:

With wounds from the Great Recession still fresh, chastened Americans are hoarding more cash in their checking accounts than at any time in the last 25 years.

The defensive stance, uncharacteristic of previous periods of low inflation and an improving economy, reflects how debt-burdened Americans have striven to clean up their personal finances since the recession ended five years ago.

The lack of attractive investment alternatives, with savings accounts paying next to nothing and the stock market already at lofty heights, is another factor, financial analysts said.

A report ... by bank consulting firm Moebs Services Inc. calculated the average balance for U.S. checking accounts at $4,436 at the end of last year — more than double the average of $2,100 over the 25 years of the annual survey.

During good economic times, when unemployment and inflation are low, the average balance in consumer checking accounts is about $1,400, the survey noted.

"When times get difficult, the consumer sits things out and checking balances get larger, normally upward to $3,000 or a bit beyond," the study said. "Generally there is higher unemployment, lower inflation and falling prices."

By contrast, free-spending Americans had allowed their checking accounts to drop to an average of just $788 in 2007, the last year before the near meltdown of the nation's financial system.

The Moebs report, previously confidential for its clients, is fresh evidence of how the devastating economic downturn worldwide has changed consumer habits, especially on spending and saving.

As people have been cleaning up their financial houses, they have only slowly increased spending, and that has helped to slow the recovery because spending typically represents about two-thirds of economic growth....

UCLA economist Lee Ohanian said the study shows that despite a recent burst in jobs — employers have added more than 200,000 net new jobs in each of the last five months — there remain "some very troublesome issues in the economy."

Until recently, much of the decline in unemployment was from people dropping out of the job market, he said. "Our employment-to-population ratio is still very low."

Growth in productivity is running at less than half its usual rate, Ohanian said, and the number of long-term unemployed remains high.

"That weighs on people's minds," he said. "They think, 'If I lose my job will I be out of work for two years?' It's scary."

The result, he said, has been a wave of caution, with Americans paying down old debts, thinking twice about new borrowing and keeping cash on hand as a safeguard...
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Link:http://www.latimes.com/business/la-fi-consumer-checking-accounts-20140718-story.html