Image: Anthony Mirhaydari

Anthony Mirhaydari

People around the world, not just stock market junkies, have been whipped into a rare frenzy this week by the oversubscribed, eagerly anticipated Facebook initial public offering.

The initial public offering, scheduled for Friday (read "What to know about Facebook's IPO"), could very well serve as the crescendo for the social media, Web 2.0 phenomenon that has been one of the few bright spots of the recovery.

That recovery is now in its fourth calendar year. It is a recovery that, by just about every metric you'd care to use, has been a massive disappointment, despite unprecedented stimulus support.

But who wants to talk about things like persistent joblessness, stagnant wages or depressed home prices? I'd rather see what my old college buddies are up to or post a snarky status update.

I poke fun, but Facebook really has captured the popular zeitgeist in the way all great business cycle leaders do before they overreach. It was the big transcontinental railroads in the late 1800s, big steel in the early 1900s, then radio, aerospace, materials, IT and housing. The Facebook IPO will be a wild success, no doubt.

Still, I can't help but be a little disappointed. I don't like what the rise of Facebook says about our economic vitality, about what we're using our energies to achieve. We're not dreaming big dreams or building big things. We're not finding intensive uses of labor and capital. But we do know the moment friends we haven't seen since high school change their relationship status.

We, as a country, can't even send anyone into space anymore. Our astronauts hitchhike on Russian rockets to the International Space Station. But we can follow their journeys on Facebook.

An Angry Birds nation

The rise of Facebook reflects the reality of our debt-deleveraging malaise -- a malaise we share with the rest of the rich world, especially Europe. It's all about austerity as we try to cut personal debt. This latest wave of IPOs has been all about free or cheap entertainment, shopping discounts or networking for new jobs. I'm sorry, but you just can't put millions to work with sepia-hued snapshots and Angry Birds. We're not going to restore the American middle class with 99-cent apps.

Not when the most recent business cycle was fueled by people indulging in McMansions and HDTVs. Not when the cycle before that brought about one of the greatest revolutions in labor productivity and information accessibility in human history. Those are high standards to meet for Facebook, a platform that achieved success by being a no-cost way to indulge some of the basest desires of the human psyche: self-promotion and voyeurism.

I've written more than once about how this economic recovery is falling short based on a lack of job growth and stagnant wages. (For one example, read "Are American workers getting lazy?") It's the same story with spending.

You can see this in the data. We're driving less. We're spending less. Really, we're living less, according to the research of Philippa Dunne at The Liscio Report. Consumption dropped hard across all spending categories during the recession and has yet to bounce back, for a variety of reasons. Thus, there is interest in companies, such as Facebook, that can benefit from this dynamic. That isn't bull market behavior in any traditional sense.

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Ten quarters into a typical recovery, inflation-adjusted consumption is about 12% higher than the previous peak.

Ten quarters into this one, which is where we were at the end of 2011, we were less than 2% above the old peak, leaving a gap of 10%. Consumption of durable goods -- things like appliances and automobiles -- is almost 12% behind the average. Nondurables are 6% back. And consumption of services, which normally doesn't fall during a recession (since it's hard to cut back on haircuts and doctor visits) is more than 11% behind where it should be, with transportation, recreation and finance particularly weak.

What's worse is that even this middling pace is unsustainable, supported by temporary tail winds like a decline in the personal-savings rate and a renewed interest in credit card debt as real wages stall. You can see this in the following chart:

© Fred

The savings rate dropped from 4.7% in December to 3.8% in March. Revolving consumer credit hit $790 billion in April 2011. Now, it's pushing toward $804 billion as shoppers turn to plastic.

According to Standard Chartered economists, unless there is an improvement in wealth or wages soon, consumption will fall back and drop further behind the historic averages. That might be good news for Facebook's unique-visitor and page-view metrics, since people will have to stay home as they rebuild bombed-out savings. But it's bad news for the rest of us.