Lower- and Middle-Income Americans Tighten the Purse Strings
Thursday, October 14, 2010 at 3:49 pm
A new Gallup poll shows that lower- and middle-income Americans — those making less than $90,000 a year — have tightened their purse strings yet again, facing high rates of unemployment and stagnant wages. All in all, lower- and middle-income Americans cut daily spending last month $6 from August and $16 from July, down to $48 per day. That is the lowest level since Gallup started tracking the statistic, in January 2008.
What’s most frightening is just how much lower-income Americans have pulled back: Your average earner is now spending less than half per day what he spent in May 2008, and 20 percent less than he spent a year ago. Those are really massive cuts.
Given that consumer spending makes up about 60 percent of the U.S. economy, that does not attest just to how hard the middle class has taken the recession, but to how hard it will be for the recovery to take hold. Until consumers spend more, employers won’t hire. But if employers won’t hire, consumers can’t start spending more. That is the horrible pretzel logic of the current economic situation.
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