Gas Prices Threaten Recovery

By Bill Hudson, WCCO-TV

St. PAUL, Minn. (WCCO) — Lunchtime at La Cucaracha Mexican restaurant in St. Paul is busy. Likewise, in many other St. Paul restaurants, more folks are dining out more often.

Also on Selby Avenue, hair stylists at the FiveTwoSix Salon are seeing their customers more frequently. A few doors away at Golden Thyme Coffee, they’re feeling what’s known as the “latte effect.”

From a purely consumer standpoint, the state’s economy is on the mend.

Donna Miller is among the consumers feeling more confident.

“I come here for coffee, lunch, breakfast meetings. I get my hair cut two doors down and my clothes tailored next door,” Miller said.

Miller is typical of what many of us are feeling when it comes to the economy. She is ready to loosen her purse strings when there is something that she wants or needs. It’s called “discretionary spending,” and it’s a big part of the economic recovery.

The bad news, however, is that a rapid jump in gas prices is threatening to kill the party.

“Every time you spend more at the pump, there’s less to spend on everything else,” said Dr. Agapitos Papagapitos, chairman of the economics department at the University of St. Thomas.

Papagapitos said that if oil climbs to the record levels seen in the summer of 2008, when crude oil hit $140 a barrel, forcing consumers to spend $4 a gallon for gasoline, the recovery will face a major threat.

Coffee shops, hair salons and restaurants won’t be the only places feeling the pinch.

“This recovery has been anemic and not robust. And anything that can set it back could be a problem for the economy,” Papagapitos said.

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