Oregon Public Broadcasting

The holidays are a time when people usually losen their purse strings.  But not this year.

Unemployment is up, retirement savings are shrinking and people are buying less stuff.

Understandable, but it's worrisome for the economy: consumer spending makes up more than two thirds of the gross domestic product.

We're exploring the role of the holiday shopper as the financial crisis continues, in a series we're calling "Holiday Freeze." Reporter Megan Verlee with station KCFR in Denver has our first story, exploring this Newfound Frugality.

Jessica Wilson is a retailer's worst nightmare this holiday season: securely employed and fiscally stable and yet, she's cutting back on her shopping.

Jessica Wilson:  "I'm trying to save more money just in case the economy gets worse and I lose my job.  Like last year I might have been willing to put some more money on credit cards, knowing I could pay it off in the spring, but now I'm not so sure I'll be able to."

Wilson and her friend Rick Blankmeyer are on their way out of the REI flagship store in Denver.  They came to pick up handwarmers -- a practical purchase on this 'chilly afternoon' ñ and had to leave  quickly when other outdoor toys started tempting their wallets.  The down economy hasn't hit their pocketbooks yet, but it is giving them the jitters... Blankmeyer says it's a wake-up call.

Jessica Wilson: "It really does make you think about how we got into the economic mess to begin with, just spending money you don't have, so you might as well start up with spending money you have now."

That sounds like common sense, but for years businesses have fueled their growth with our over-spending.  If shoppers play Scrooge with their credit cards this holiday season, economist Nancy Kimelman says a lot of companies will feel the chill.

Nancy Kimelman:  "The recession weeds out the weak companies and it strengthens and solidifies the companies that are going to make it.  As much as we don't like to hear of companies failing, and as much as we don't like to hear of people losing their jobs, what happens in a recession is actually quite necessary for the long term viability of an economy."

But as weak businesses fail, that means more people out of work, which means even fewer shoppers in the stores, which hurts more companies, which...  Are you starting to hear a giant sucking noise right about now?  Sounds like a downward spiral to me.

Nancy Kimelman: "Why is it that being individually responsible about how much you spend seems to be hurting    the economy?  Unless we take our savings and plug them into the mattress or underneath the bed, those savings are actually being used in the economy.  When we save, we put our money in a mutual fund, we put our money in the bank, and the mutual fund or the bank turn around and use that money for investment purposes."

Those investments, Kimelman says, help successful companies rearrange themselves to better fit the new economic conditions and sell us the things we want when we start shopping again.  But it's a slow process and in the meantime, rising unemployment creates a lot more non-shopping, non-saving people.

Nancy Kimelman: "This is the prime example of when you need what is called fiscal policy.  We need the federal government to step in, and we need the federal government to spend money."

Which is why president-elect Barack Obama has been talking about direct government spending -- programs to build roads, fix bridges, and lay high speed data lines ñ putting potentially millions of people back to work and back into the stores. As long as those stores can survive the holidays.

In an upscale Denver shopping district, people exclaim over wildly decorated store windows while a band plays in the background.  The display is part of a month of free events and decorations sponsored by local businesses in the hope of cheering people into a spending mood.  Standing near the display, Karen Nichols is the kind of shopper they're counting on.

Karen Nichols: "I was just thinking I really would like to have a party, because I don't think anybody else is going to have a party."

And that seems to be the best retailers can hope for this holiday season -- that consumers won't close their wallets completely while the rest of the economy sorts itself out.