(If the unemployment rate at which inflation is stable is lower than 5 percent, the disinflation problem I am discussing becomes larger.) A little arithmetic shows that this scenario involves 1.9 point-years of extra unemployment (relative to the full-employment benchmark) between now and the end of 2004.
In other words, it made them more cautious. In the boom years leading up to the crisis, many economists believed that increases in wealth, especially increases in home equity, helped fuel consumer spending. However, fewer than 30 percent of boomer families reported in 2007 that they would be willing to spend out of any increase in asset values.