Cash 1 Blog
American Spending Habits
The headline at the link pretty much says it all: Americans are back to their pre-recession spending habits. As enthusiastic as the article is about the fact that Americans are spending more and saving less, we’re not so sure this is a good thing. In fact, we’re not so sure this is actually a tangible method for measuring economic growth, at least not when compared to other economic realities since 2008. So we thought we’d take a look at some of the factors trumpeted in the article as positives and see if they actually do measure up to economic success or if perhaps things aren’t as rosy as we’re being told they are (chances are, you already suspect this, but read on if you want to confirm your suspicions).
- “The jobless rate is the lowest since 2008”. Well, that certainly sounds promising, right? The jobless rate has dropped. But note the key phrase here: “since 2008”. This means that the jobless rate is simply at its lowest since the start of the Great Recession. According to the Bureau of Labor Statistics however, the 4.9% unemployment rate is still higher than at any time since the early 1990’s. Don’t get us wrong, we’re glad unemployment is down, but many of you are still feeling the sting of being without a job, or in a household that has been reduced to one income.
- “Overall spending on technology has trended upward since 2009”. As great as this may sound, there are several factors to consider here, not the last of which is the development and refinement of smartphone technology in the last five years. That may not seem too relevant until you note that most of the major cellular carriers have mandated an upgrade from their customers in order to eliminate the need for the upkeep of older technology. Last year alone, cellular companies Cricket, Verizon and AT&T switched to newer signal carrier technologies and compelled their customers to upgrade phones. Since more people now use their cell phones as their primary communications device, such required change is likely to be reflected in “an increase in spending on technology”.
- “In March 2015, the current bull market hit a six year high, gaining more than 200 percent since it bottomed out in March 2009. At present, it is the third-longest bull market in history.” Again, this sounds like everything is back to where things were before the 2008 economic collapse. But again, it is unlikely this is an accurate indicator of economic growth (and thus, consumer spending confidence). Quarterly economic growth has averaged just 2% since 2009, according to Forbes Magazine. That is the slowest period of economic growth in U.S. history (including the Great Depression, which saw quarterly growth average over 3%). Employee salaries have not increased much either, rising less than 2% since 2008. That’s eight years without a significant raise. And yet:
- “Americans spent the most on essentials such as housing, healthcare and transportation, which, when combined, account for more than half of all spending.” We have to wonder: is this a good thing? More than half of our income was spent on shelter, healthcare and transportation. One would think that essentials like food and clothing might be included in the top three things Americans spent their money on, but then consider the fact that the Affordable Care Act went into effect in 2013 and mandated all United States Citizens to have health care coverage or face punitive fines. Gallup notes that 75% of Americans claim their health insurance premiums have gone up every year for the last three years. For some, those premium increases are going to skyrocket this year (up from 25-49% in some American markets).
- “The greatest spending gains for 2014 are mostly in the realm of nonessential categories such as alcoholic drinks (in home), dining out and vacations and tourism.” This means people are doing these things (drinking, eating out and vacationing) again where they simply weren’t when the recession was at its worst. It’s good to see that discretionary spending has increased, but since 2008, up was the only direction discretionary spending could travel.
Those are just a few of the aspects of the article we wanted to point out in order to make a point: just about anything can be spun to seem as though things are better than they were, but that doesn’t make a bit of difference to people who haven’t experienced these growth rates. Discretionary spending may be up, but according to the U.S Census Bureau, there are more people living in poverty (46.7 million) than at any time in U.S. History, including the Great Depression. That translates to 14.7% of the population, the highest rate since 1964.
But American spending habits – even if they’re back to pre-recession levels – have changed a great deal, and it’s likely to be a permanent change. If you read the first linked article above, you might have seen that more people are spending money on vacations and travel. This is a drastic change from pre-recession spending which saw most discretionary spending going toward material goods. Yes, people are still spending money on material possessions, but where spending on things like cruise vacations and overseas travel is at unprecedented levels, department stores are actually seeing some of their worst years on record as folks spend less on things like clothes, jewelry, and the like. The shift seems to indicate an attitude that memories and life experiences have taken a higher priority than a large wardrobe.
To bolster this sentiment, sales on things like movie tickets, gift cards for dining establishments and tickets to special events like concerts have hit record levels, while new car sales have slumped due to the fact that more people are keeping their cars longer. In fact, leases on automobiles are well off their 2006 peak.
So this is what the economy looks like now, and this is how Americans are spending their money. In part 2 of this article, we’ll take a look at the things Americans waste their money on the most.
In the meantime, if you find yourself short of cash and need a financial infusion, come to CASH 1 to see our title loan or payday loan requirements. Find out if our personal loans or Nevada title loans services are right for you.
Joseph Priebe takes pride in assisting audiences with his articles to help them make sound financial decisions.
With over ten years of experience writing financial content his goal at CASH 1 has always been creating engaging and easy-to-digest information for anyone searching for immediate or long-term monetary solutions.
When Joseph is not writing about personal finance, you can find him photographing the Southwest United States with his 4x5 Graflex Crown Graphic camera. He is based in Phoenix, Arizona.