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Adding to retailers' worries is the fact that most shoppers aren't sure whether they should pop a cork or a Xanax. According to a TIME poll, 27% of respondents think the economy will deteriorate next year, while 26% feel it will improve. Some 38% said they are spending less this season, while 15% said they are spending more. Those mixed messages have economists puzzling over just what's making the consumer tick this holiday season. But they learn more about the science of shopping all the time, and a close look reveals how we are mustering the fortitude to spend our way through the economy's cross-currents:
JOBS. Some folks are strapped after years of a jobless recovery. But this year nearly 2 million jobs have been created in the U.S., and wages and salaries are on the rise. The momentum was reinforced last Friday, when the Labor Department reported 215,000 new jobs in November. "There is a huge disconnect between the headlines and reality," says economist Ed Yardeni at Oak Associates, an investment firm. "It's a prosperous world." But in the consumer's mind, nothing trumps job security. Reuben Kuruvila, 26, of Atlanta, plans to spring a fur coat on his wife. "I really can't tell what the economy will do," he says, but adds that he expects a decent raise after completing management training at the hotel company where he works.
STOCKS. Have you checked your 401(k)? The balance may be below where it was five years ago. But it's moving up. The Dow Jones industrial average has gained 6.5% over the past six weeks, is in positive territory for the year and is within striking distance of its all-time high of 11,723. Fueling the rise: companies are flush with profits, buying back shares and raising dividends. "I don't factor it into decisions like shopping," says Scott Fuselier, 32, a sales manager in Atlanta, of his rising 401(k) balance. "It's so long-term." Yet that is measurable wealth for the half of the population that owns stocks. Confident in his net worth and prospects, Fuselier is renovating two rooms in his home for Christmas.
ENERGY. The high cost of oil, electricity and natural gas is the greatest economic worry for Americans, according to the TIME poll; 69% call it a major concern. But it's not as much of a drag on spending as you may think. Yes, consumers will spend $24 billion more on energy this quarter than in the same period last year, a 21% jump. That hardship is prompting some to rethink holiday splurges. But prices have come down from their post-Katrina highs, far enough to spur a spike in consumer confidence. For a while, says college student May Rashid, 22, in Fort Worth, Texas, "gas prices were taking all my money," and she planned to cut holiday spending. Now, with gas prices falling, she figures the crunch will be manageable and is enticed to keep shopping because "I keep finding things that I know people would really want."