The NY Times ran a story today on how the "Great Recession" (I’ve not heard it called that before) has had what eventually might be a long term or even permanent effect on consumers’ spending habits.

Having been so burned and beat down by the major recession of the past two years, the American consumer — the true engine of our go-go economy — just might have run out of gas for good.

The article draws parallels to the reactions of consumers after the Great Depression. These are apt comparisons. We all know parents or grandparents who are much more frugal than our free spending recent generations because they either lived through, or were influenced by, the severe and lasting economic impacts of the mother of all economic declines, the Great Recession.

So, my question today is this: Are US consumers now so traumatized economically that they will adopt a frugality that lasts for years, even as this recent Great Recession appears to be residing?

I am of two minds on the answer. On the one hand, I know how my personal discretionary spending (and some not even so discretionary) literally went dark in the past year. More important, I realize that many people are still out of work and the total job outflow has not stopped yet.

In fact, the news is out this weekend that the joint Toyota/GM NUMMI car plant in Fremont, CA (in the Bay Area) will likely shut down, as Toyota is saying sayonara to the partnership. If/when that happens, there goes another large number of reasonably well paying jobs.

I do think this recession has been deep and broad enough to cause a real psychological change in American consumers. There is no question that people — even the well off and rich, who were previously viewed as relatively recession-proof — are less willing today to go out and spend freely. It does not mean that they won’t purchase any discretionary items at all, but that such spending is considerably less exuberant right now, and probably will remain so for the foreseeable future.

People are beyond wary when it comes to economic and financial issues, and there is still plenty of pain out there…lots of fear, too.

But, there is a flip-side to this question. The fact is that there is huge pent up demand amongst consumers, and they are tired of living the life of parsimony. They want more "La Vida Loca!" Hey, who can blame them?

I was in NYC recently and you would not have thought for a moment that we were just starting to climb out of the biggest recession in a century. Shops were busy, restaurants crowded, and the streets filled with people (including a hoard of tourists, many of them Italians on their August "festa"). My base city of San Francisco is looking much the same.

A healthy level of commerce seems to be happening all around us, and it even appears to be on the rise. (To be sure, these are just my anecdotal observations, but consumer sentiment and ultimately confidence is mostly driven by just that — anecdotes, feelings and personal experience. Measurable science has nothing do with how consumers actually feel or what they are thinking in a recession.)

Yes, Vogue Magazine’s famously massive September issue weighs in at just 50 lbs vs the usual 150. Things still look pretty good, however, at  least on the outside.

What I think is really happening in the wake of the Great Recession is that we are now seeing an even deeper delineation of two quite separate "Consumer Americas." Indeed, America’s growing and widening gulf between the "have’s" and have-not’s" has been one of the biggest and most troubling economic and social issues of the past half century.

The current picture is that one side of that American economic divide is populated by people who have lost their jobs and are rightly afraid of the future, as well as those who still have jobs but are fearful about holding on to them. These are the folks who are cutting way back on all kinds of spending, discretionary and otherwise.

The other "Consumer America" is made up of the lucky ones who are in industries and jobs that are doing well and starting to even benefit from the tough times. And, make no mistake about it, strong companies typically get even stronger during economic downturns. The Wall Street Journal featured an article today that described how the faltering economic recovery is producing two kinds of companies — those that can get credit and thus can expand and flourish, and those that can’t get loans, and are just barely holding for dear life in a still challenging market.

There is a parallel effect happening with consumers themselves. Those that have the cash and the credit (and the steady jobs at good companies and strong organizations) are seeing their prospects brighten up quite a lot. Those that lack all of these important assets are experiencing pretty gloomy prospects, even as the recession apparently ebbs.

At the risk of going all cliche on you, in my view the only thing that is going to get us out of this bifurcated economy and consumer psychology is the power of optimism and entrepreneurial risk taking. These really are the great engines of our economy, and our society overall. Both consumers and companies need to feel that jolt of optimism again. Only then will they start to open up and hire again, pursue new ideas, and start to put wind back in our economic sails.

All of that said, I guess I come down on the side that consumer spending won’t be depressed forever. I doubt our recent huge recession will have the same long term psychological effect as did the Great Recession. I am optimistic that our natural optimism and enthusiasm as a country will return even sooner than expected, and people will start moving again. And that means they will also start buying and going out, and creating economic activity that generates even more positive momentum and confidence.

At least, that’s what I hope — and what I am banking on!

Of course, if the new post recession psychology means that from now on consumers will be happy with smaller economy cars rather than bloated Hummers and Suburbans, that hideous McMansions have finally had their day, and young women won’t feel the need to buy a gaudy, overpriced handbag every month, then perhaps the Great Recession will have had some positive effect after all.

Hope does spring eternal.

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