A spike in oil prices preceded 10 of the last 11 recessions since World War II. In March, energy prices passed a dangerous threshold that suggests we could be on the verge of number 12.
When energy spending rises above 6% of total expenditures, economist James Hamilton explains, consumers start to change their behavior significantly. In March, with unemployment near 9 percent and families still reeling from the credit crunch, we hit 6.27%.
Hamilton unpacks the details:
I've noted before that once energy expenditures get above 6% of average consumer spending, we start to see significant changes in spending patterns. We crossed that threshold in March, when 6.27% of every dollar spent went to energy-related goods and services. For lower-income groups, that expenditure share is significantly larger.