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Last week the census bureau reported that in 2007, after adjusting for inflation, middle income Americans experienced the lowest income level since 1997.
What kind of impact are middle income Americans likely to have in the US economy going forward? How will this impact consumer spending which represents about 2/3 of the US economy?
I will share my thoughts on this with you next week after you have a chance to voice your opinion.
Due to the recent increase in unemployment, consumer spending will decrease. According to the New York Times graph of the unemployment rate, the unemployment rate has risen from just around 5% in 08 to over 9% in 09. This will cause consumers to spend more of thier money paying off debt instead of pumping money into the economy. Also according to the New York Times, retail sales are down as much as -10% in 09. In the end, the steady increase in the unemplyment rate will cause a steady decrease in consumer spending.
In fact the US economy is in its worst shape since the great depression.
It is true for average Americans, the last 10 years were a lost decade. At the end of President George W. Bush’s eight years in office, American households had less money and less economic security, and fewer of them were covered by health care than 10 years earlier, the Census Bureau reported in its annual survey.The poverty rate in 2008 rose to 13.2 percent, the highest in 11 years, while median household income fell to $50,303. Ten years earlier, adjusted for inflation, it was $51,295. “Wall street journal”
But how do we got here, we ask
rigth know asking that question is not enough, we need to take concious about our personala way we handle our finances borrow less and save more.
I think that the middle class Americans today during this economic situation, do not think about spending their money but instead save it for the future. I think that the reason Americans are saving more today is because they are worried that there is gonna be hardships ahead regarding the economy. If the economy improves these people are going to be in a much better situation because they have more money stored, but if the economy worsens at least they will have something to fall back upon, because of the fact that Americans are saving more and spending less obviously there will be less demand for consumer spending on products. I believe that from this point on companies that provide products are going to have to focus consumer rather than personal gain.
In my opinion, if the unemployment rates keep decreasing like it is now, a lot of middle class Americans will lose their jobs. Focusing on New York City, the article by Patrick Mcgeehan published today on “The New York Times” states that unemployment rates hits 10.3%. M. Patricia Smith, the state labor commissioner, emphasizes that in “The Wall Street” most of the layoffs have involved mid- and lower level workers. No job equals no source of income, therefore the US economy will have a downfall especially in consumer spending. In conclusion, if unemployment rates don’t increase, a lot of people will lose their jobs and/or stay unemployed since jobs will be scarce.
Middle Americans are the foundation of the American economy. While the Upper Class makes large purchases, they are an overwhelming minority. The average every-day American is what drives the economy whether it be through good times or bad times. A drop in the income for Middle-Class America to me shows just how far-reaching and devastating this recession has been. Consumer spending as noted in the prompt equates to 66% of the American economy. I think the figures that come out within the next half a year will paint the picture that has been drawn up over this past year when Middle America hasn’t taken home as sizeable of an income as they did in previous years. So I think in the coming half of year, consumer spending with naturally decrease. Of course, just how far consumer spending drops is dependent upon a couple factors including how confident consumers are that their income will regain its potency in the coming months. Also factoring in to the equation is how well retailers will market themselves. If some of the previous methods and trends continue, combine with lower consumer spending then the economy could continue to slide. If miss-management is limited, then consumer spending may not slide as low as is potentially possible and might even stabilize as a recent Gallup poll has hinted towards, thus leading to a rebounding American economy.
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What kind of impact are middle income Americans likely to have in the US economy going forward? How will this impact consumer spending which represents about 2/3 of the US economy?
Middle income Americans, in my opinion, have tightened their wallets and will continue to do so until they feel comfortable enough to spend. CNBC states,”Consumer spending, which represents ~70% of GDP, hit a 17-month low in February” these numbers were increasing 5% every year annually until the drops in spending. Consumer spending will slowly make its way back, people are finding alternatives to luxuries, such as spending a friday night at home watching a movie and eating dinner instead of going out to dinner and a movie. The unemployment rate of 9.7%(bureau of labor stats) is causing much of the loss in consumer spending and until that increases consumer spending will not. Middle income Americans are spending less and without more money not much is going to change.
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Middle income americans are the base for the economy. Which means that as long as the middle class are spending money then the economy will be in a good situation, Unfortunetly this is not the case now since more and more middle class americans are getting laid off of their jobs than their spending habbits are going to decrease dramatically as well as the unemployment rate is increasing. Until more Americans go out and get jobs in order to get off unemployment then we will not being seeing a big change in the economy. This is going to impact consumer spending immensly since middle class income is the main structure for the economy. Until these people find away to break this cycle then there will not be any drastic changes in the near future with the economy.
It appears that a significant number of the “unemployed” will be losing their elegibilit. For unemployment compensation. I know that unemployment numbers are adjusted downward for those who no longer file for unemployment. Will this loss of elegibility distort the unemployment numbers since these people would like to file but cannot be filed
The middle class has already sufferd enormous cut backs and budgeting within this past recession, which has made comsumer spending drop in ratings. According to the USA Today, 1.6 million “middle class” families have filed for bankruptsy. On average a four person household is spending 21% less on clothes and 22% less on food according to the USA today. The middle income American families have been trying to come back from all this, but seem to be getting nowhere because of recent debt and job cut backs. The working middle class American families have a long road in front of them but with the numbers starting to go up, it looks like the clouds might actually start to be clearing.
What kind of impact are middle income Americans likely to have in the US economy going forward? Many Americans are going to be spending less on luxury items which could hurt key industries and sales taxes which will affect local governments the worst. However Americans will most likely save more and continue to use borrowed money out of necessity which will be good for the recovery of American banks. In the end we can expect cheaper prices on non-necessities, an increase in local taxes; such has property taxes, or perhaps an even greater tax on necessity items.
Middle aged Amerians make up of most of the Americans in the US. At this point, I believe it will get worse before it gets better. I also believe that because the incomes and pay rates are so low, the spending habits of American may change for the more luxuary items vesus the incidentals that are required for daily living. Once the income and pay rates stabze and Americans begin to start purchasing more luxuary items the ecomomy may change and begin to get better, but I also think that after the scare they have experienced with the income issues, American may start to be cautious of the purchases. I believer this is one big circle and will continue as time goes on.
I believe that the sever decreased income of middle income Americans is greatly going to impact consumer spending! When family don’t make as much they cut back to save. A great example of this is the Verizon commercials. One shows a father shutting off the hot water in the shower, eating dinner in the dark, not driving as far. These are all very serious things that people are doing now. And for effects in the long run, I feel when the economy is back on track and family’s are making ends meet, they will still be more efficient with everyday doings. Such as turning lights off and buying more efficient cars.
The decrease in overall middle class income is going to have a huge negative impact on the overall U.S. economy. The middle class makes a huge impact on the economy because they are the majority. This will have a negative impact on consumer spending because the majority of consumers are middle class. They will not have the extra money to spend on the things they want they will only be able to buy the things they need.
According to an article by Joshua Zumbrum in Forbes, “The freshest data suggest the labor market is still worsening, but much less quickly.” Although the stimulus packages we have received have helped a bit, it has yet to transfer to the job market. The US needs to focus on job creation so the American people can actually have some money to spend to boost the economy.