Oct. 12--Some things are just so ugly you can't bear to look. That's the stock market these days.

Losses of more than 40 percent during the last year--18 percent in the last week alone--have spread such shock and fear that some Americans can't even look at their retirement accounts. It doesn't matter whether economists tell us the losses are "just on paper." People feel less wealthy, and their mutual fund statements confirm that it's not just psychology.

As a result, they're snapping their wallets shut. This is deeply troubling news for the U.S., where consumer spending represents 70 percent of gross domestic product. When Americans like Peter Polansky, 61, of Highland Park cancel a family vacation to Jamaica, or put off buying a new home entertainment center like Ulisses Gutierrez, 41, of Chicago, their actions ripple through the economy. Service workers lose their jobs. The auto and airline industries sink further. Retailers, faced with a miserable holiday shopping season, brace for financial losses. When corporate earnings take a hit, so do stock prices. It's a unnerving cycle.

"When people are scared, they don't spend money," said David Wyss, chief economist at Standard and Poor's. "And when they don't spend money, GDP goes down and fewer people have jobs."

Wyss said the brand of fear seizing the American consumer is different than the sentiment after the Sept. 11 attacks, when Americans altered their spending habits but kept shopping--buying items to make their homes more comfortable rather than eating out, for example. But when the fear is focused so squarely on the markets, the spending slowdown is pervasive.

Beyond the daily headlines, there are longer-term factors at work. Stalled credit means that Americans will have to start saving and living within their means. This will require a deeper cultural shift in the way consumers have approached spending.

"I think it's surprising for a lot of folks because even a year ago, we consumers had luxury fever," said Linda Tuncay, a professor at Loyola University Chicago's School of Business Administration who studies consumer behavior. "So you had even the average consumer going out and purchasing Louis Vuitton bags and things like that. We kind of got used to that lifestyle and now, all of a sudden, you can't live beyond your means and you don't know what's going to happen."

Much of our economic future is uncertain. But not all of it is out of our hands. What happens next depends on people like the Chicagoland residents profiled here. We asked how they see the economy, how the crisis is affecting their daily lives and what they expect of the future.

wawong@tribune.com

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