July 14 2014
Improving Economy but Empty Wallets
Patrice J. Lee
The unemployment rate has dropped to 6.1 percent and 1.4 million new jobs have been added since the beginning of this year, but are Americans feeling the difference? New polling indicates not and it has something to do with the quality of jobs being created and the quality of life Americans are enjoying.
Only one in five Americans thinks the economy is excellent or good according to new Gallup polling. Gallup measures Americans’ overall confidence in the economy. It has held steady -unfortunately at double-digit negatives – hovering around – 16. While 20 percent of Americans say the economy is excellent or good, 33% say it is poor. Furthermore, 56 percent say the economy is getting worse.
That bears out not just in unemployment numbers but in how we live everyday and the level of purchasing power we experience. Examining spending habits and perceptions we see that Americans are increasingly spending more on household essentials. Slightly less than half of all Americans (45 percent) reported spending more than they did one year ago and they’re doling out these extra dollars on groceries, gasoline, utilities and healthcare rather than discretionary expenses. For example, 59 percent said they are spending more on gas this summer than one year ago and net spending is about 49 percent more. At the bottom of the list are leisure activities, clothing, consumer electronics, travel, and dining out which suffer from negative net spending.
These results paint a picture of consumers straining against rising prices on daily essentials to afford summer travel, dining out, and discretionary household purchases -- the kinds of purchases that ordinarily keep an economy humming. And while the two-thirds of Americans who plan to travel this summer is the highest level Gallup has measured since 2006, nearly one-third plan to spend just one night or less away from home, meaning it is not much of a vacation.
... Because consumer spending is the lifeblood of a healthy economy, these findings suggest that discretionary spending still has a ways to go before it will fuel the kind of economic growth Americans have been hoping for.
It appears that discretionary spending is no longer an expectation, but a luxury that middle class Americans are losing grip on. This is both detrimental to the strength of our economy and a discouragement to social mobility.
For those who are blessed enough to find work, the kind of jobs they are landing may not provide them with much discretionary income. According to the Wall Street Journal, more than 40 percent of the jobs created in the past year have been in sectors that typically have the lowest wages such as food service, retail and temporary help. The unemployment numbers also mask the hardship of long-term unemployment as millions of Americans have given up looking for work and dropped out of the labor market entirely. Just ask the 1.92 million 18-34 year olds discouraged from looking for work according to Generation Opportunity. (In full disclosure, I work for GenOpp).
Washington has many problems on its hands and realistically its power is limited. What it can do is avoid policy that drives the costs of doing business higher. Then we all lose out.