between flat wages and rising prices, many middle-class
consumers are feeling poor.
recession forced many people to change their ways as
nearly 9 million Americans lost their jobs and home
foreclosures hit record highs.
a result, many stuck their credit cards in a drawer, cut
back on spending and hunkered down.
five years after the recession ended, the economy
appears to be improving, but middle-class consumers
still haven’t bounced back.
fact, a recent Federal Reserve report found that more
than a third of American households say they’re worse
off now than in 2008, and nearly 40 percent said they’re
"just getting by" or struggling to do so.
spending isn’t dead, but today’s consumer is more
prudent, looking for ways to save money, buying cheaper
brands and spending a larger share of income on
necessities. Midyear retail sales were so disappointing
that many national retailers lowered expectations for
the rest of 2014.
really are a little bit scared — memories of how
catastrophic it was and how much worse it could have
been in 2007-2008," said James A. Roberts, a
marketing professor at Baylor University in Waco, Texas,
who has studied consumer behavior for 25 years. "I
think we all still see an economy that we don’t trust
— that the other shoe’s going to drop."
how 25-year-old Dallas resident Marty Martinez feels.
terms of spending, I have really reeled it all the way
back because I don’t know what the future will hold
for me," said Martinez, who launched a digital
marketing business in February. "Starting your own
business, there’s always uncertainty. I rarely buy
anything that’s full price."
estimates his annual income will be about $40,000 this
year. Martinez plans to drive his 2002 Honda Civic
"into the ground" to delay having a car
payment on top of his student loan payment of $475 a
spending drives the economy, accounting for nearly 70
percent of the nation’s economic output. So if more
people live within their means, like Martinez, that’s
not necessarily good for the economy. Some policymakers
and economists worry that changing consumer spending
patterns could slow economic growth at a crucial time.
middle class matters because it’s such a large group
— estimated to make up nearly two-thirds of U.S.
households. There is no single definition of the middle
class, but one measure says it’s household income of
about $40,000 to roughly $100,000. Other estimates place
the top income higher.
are not feeling that they’re getting ahead," said
Elise Gould, a labor market economist for the Economic
Policy Institute in Washington, D.C. "During and
since the Great Recession, we’ve seen wages have been
flat or falling. That’s a serious problem."
Americans have seen their incomes shrink since the end
of the recession in mid-2009 and even farther back.
Income consists of wages but can also include stock
gains, Social Security payments and income from rental
property or other sources.
household incomes, adjusted for inflation, are down
significantly from five years ago," said Gordon
Green, a former U.S. Census Bureau official who is a
partner in Maryland-based Sentier Research. "If
people’s incomes are significantly lower than where
they were five years ago, they don’t have the same
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census data adjusted for inflation and seasonal
variations, Sentier calculated that U.S. median
household income — what families earn at the midpoint
of all income levels — fell 3 percent to $53,891 in
June from $55,589 when the recession ended. That income
was down nearly 5 percent from when the recession began
in December 2007.
the nation’s wealth gap has widened in the last
decade. While the median household net worth rose for
the top 40 percent of income distribution from 2000 to
2011, it fell for the other 60 percent, according to a
recent census report.
inequality is hurting U.S. economic growth by
discouraging investment and hiring, hindering social
mobility and producing a less-educated workforce,
according to a recent report by Standard & Poor’s.
Last month, the credit rating agency lowered its 10-year
U.S. growth forecast to 2.5 percent, down from 2.8
percent in 2005.
bottom line is if wages and incomes are down, people
have less money to spend on goods and services.
spending dipped last year — the first decline in three
years — as families cut back on clothing,
entertainment, restaurants and charitable contributions,
according to government data released last week.
Consumers spent an average of $51,100 last year,
compared with $51,442 in 2012.
not just a question of spending, but what kind of
spending. A larger share of consumers’ wallets today
goes toward necessities like food, transportation and
2009 to 2012, Americans’ spending rose 21 percent for
eggs, 19 percent for medical supplies and 26 percent on
new cars. Some of the increase could be due to higher
prices on certain items, such as milk and meat; aging
baby boomers needing more medical care; and persistently
high energy costs.
seeing some shifting of spending," said Baylor’s
Roberts, who wrote the book "Shiny Objects: Why We
Spend Money We Don’t Have in Search of Happiness We
Can’t Buy." For example, sales of durable goods
and autos are up this year because consumers "put
off buying that refrigerator" because of previous
job uncertainty, he said.
shift in spending began about 20 years ago and has
accelerated in the last decade as more people move
toward a lifestyle based less on reckless spending and
more on value.
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could continue to take a hit if prices continue to climb
and interest rates rise next year, squeezing some
consumers’ pocketbooks, and if pent-up demand fades
for durable goods like cars and washing machines.
and Narcy Gonzalez of Plano, Texas, have seen customers
spend more at their businesses as the economy has
Fence Makeovers is doing well enough that he’s moving
to a bigger location with a warehouse. And Narcy’s
3-year-old Polka Dot Bakery in the suburb of Addison has
increased revenue about 10 percent a year.
is a bit more affluent," Narcy said. "The
people who frequent my shop aren’t as concerned about
prices as the quality of the product."
couple said their annual income of about $200,000 and
the amount of money they spend hasn’t changed much
since before the recession.
spend so much time working … if there are things I
need or want, finances allow me to do that," said
Narcy, whose last personal purchase was a $400 Kate
Lei, associate professor at Southern Methodist
University’s Cox School of Business, calls it the
at the bottom spend like an EKG chart — spending only
when the paycheck comes in," Lei said. "The
higher end recovered faster than everyone else. The real
problem is the middle, which is a giant squeeze."
disagree on whether the U.S. consumer is forever
changed, which could lead to longer term economic
issues, or if this is a temporary blip in commercialism.
G. Christopher Jr., director of consumer economics for
IHS Global Insight, is still counting on consumer
spending to drive the bulk of future economic growth. He
expects consumer spending to grow in the next two years.
think job growth is the best way to spur consumer
spending and economic growth.
the Economic Policy Institute’s Gould says job growth
without wage growth isn’t enough.
need to help regular people see wage growth," Gould
said. "The answers are there. In states that
increased their minimum wage in early 2014, wages
actually rose slightly. Policy can matter. None of this
U.S. minimum wage is $7.25 an hour, or about $15,000 a
year. President Barack Obama has been pushing Congress
to catch up to 13 states and some cities that have
raised their minimum wage to as much as $15 an hour.
Doggett, a senior lecturer in management at the
University of Texas at Austin, sees more of a
most recent recession was the deepest and longest"
since the Great Depression, he said. "People feel
that. I think we’re looking at a midterm to long-term
permanent shift in consumer behavior."
DEALS HELP MILLENNIALS SPEND LESS
resident Marty Martinez has figured out a way to eat
many of his meals for free, or at a deep discount.
uses four free mobile apps to search for deals, such as
free coffee and two-for-one dinners, at local
businesses. He estimates he saves $50 to $60 a week.
app identifies his location to tailor searches to the
Dallas area. He "claims" a deal and then shows
it on his phone to the business when he arrives to
redeem. Here are the four apps and how they work:
Click on "lunch" on the menu bar of this
social network app and scroll down to "offering a
special" to see options. Last week, Martinez got a
free cup of coffee.
Type "deals" into the search bar of this
business review and recommendation app and look for
specials listed in green type. Last week, a restaurant
offered $20 off a $40 dinner.
One recent deal on this restaurant discount app was
all-day happy hour.
Martinez helped create this social network app for 26
cities as a college student. It aggregates all of the
specials from Foursquare, TangoTab and Yelp.