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U.S. Households Under Pressure: Stagnant Incomes, Rising Basic Expenses
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
How do you support a consumer economy with stagnant incomes for the bottom 90%, rising basic expenses and crashing employment for males ages 25-54? Answer: you don't.
Frequent contributor B.C. passed along a sobering set of charts that provide context for How The Average U.S. Consumer Spends Their Paycheck. The basic story is well-known to the bottom 90%: most of the household income goes to taxes, housing, food and transportation, with healthcare and insurance, pensions and retirement contributions rounding out the big-ticket items. (Higher education is, as we all know, paid with student loans by all but the top-tier of families.)
Here's the question this raises: is the sliver that's left enough to support a $17 trillion consumer economy? The answer is obvious: no.
Stagnant household income has a number of systemic causes, including the generational decline of full-time employment (A Rising Share of Young Adults Live in Their Parents’ Home) and the concentration of wage gains in the top 10%. These dynamics are not easily addressed, for the simple yet profound reason that the amount of human labor that generates a meaningful profit in a stagnant, over-indebted, financialized economy is declining.
The only way most enterprises can sustainably earn a profit is to offload costly human labor (with its immense burdens of healthcare, pensions, workers compensation, disability insurance, etc., and the heavy regulatory burdens of workplace rules) and replace it with networked software and smart machines.
The types of human labor that generate hefty profits are increasingly scarce, and as a result entry-level pay and employment are both capped by the high costs of human labor (even at minimum wage) and the relatively meager profits generated by conventional labor.
Most of the big profits are generated not by labor but by financialization, stock buybacks and other financial gaming of debt and leverage.
The few areas of human labor that generate hefty profits are either in the protected fiefdoms of state-enforced cartels, or in financial services (i.e. those playing the financial games with debt and leverage) or those creating the software and machinery that replaces costly human labor.
Here are B.C.'s comments on the data:
Nearly half of disposable income is spent on housing and food.
More than 50% of disposable household income is spent on housing and transportation (overwhelmingly autos).
25% of disposable income is spent on autos and health care.
Two-thirds of gross income is spent on taxes, housing, transportation, and health care.
Millennials, most especially males, coming of age since the mid- to late 2000s do not earn enough to afford the major components of household spending, i.e., taxes, housing, autos, and health care (insurance).
The self-reinforcing feedback effect of lack of gainful employment and after-tax earned income causing insufficient purchasing power for housing, auto transport, and healthcare insurance that then results in lack of growth of demand for same will persist indefinitely hereafter, i.e., permanently, including reducing the rate of coupling, marriage, fertility, household formation, etc.
Here is a chart of housing and vehicle costs, broken down by age group. Note that only the peak-earnings middle groups spend less than 50% on housing and transportation.
The concentration of earnings in the top 10% and 5% is clear: the bottom 50% of households earn a fraction of the top 10%, and the bottom 90% get by with less than a third of the income of the top 5%:
The recent decline in male employment in the peak earning years (ages 25-54) is striking: the employment rate for males ages 25-54 has been stairstepping down for 30 years, but it literally fell off a cliff in 2009:
How do you support a consumer economy with stagnant incomes for the bottom 90%, rising basic expenses and crashing employment for males ages 25-54? Answer: you don't. The media shills, government lackeys and PR-pimps can spin the GDP and other gamed statistics as much as they want, but no amount of statistical gaming will change the stagnation that results from generational declines in employment, flat wages and rising basic household expenses.
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One word
BROKE!
During every US monetary shift, 1913, 1933, 1945, and 1971, the banks and governments have gained power. With the latest push to ban cash and push rates negative, I think this next one will be no different. After these policies create flash in the pan super bubbles the crash will wipe out much of what’s left of the middle class.
here we go again:
Banker jumps to his death from luxury apartmenthttp://nypost.com/2015/05/28/man-falls-to-death-outside-luxury-building/
expect heavy rain due to bankers suicide in the next few months
"
"Stagnant Incomes, Rising Basic Expenses"Isn't that the definitioin of inflation ???
This is a lie, Tyler.
This guy says otherwise:
American households feeling less financially stressedhttp://finance.yahoo.com/news/american-households-feeling-less-financial...
Steve Liesman would beg to differ with the gist of this article.
maniacal laughter
Wow, you found conflicting economic analysis. Welcome to the internet, try the veal.
So Tyler's lying, but not the guy talking his book and basing his analysis on beliefs, even when those beliefs are not supported by his own data.
Tsk, where's the good old fashioned nailgun accident? They are starting to run out of room to maneuver and we'll be seeing a lot more rats jumping ship, one way or another...
“I went outside, and the woman in the car was screaming, ‘I didn’t know where he came from!’ ” said Hans Peler, 48, a manager at the building’s parking garage
He came from hell and went straight back to it.
“The head hit the railing . . . Half his head is on one side of the railing, half on the other,” recalled Frank Rodriguez, 44, a handyman who was working nearby. “It’s never worth this . . . .”
Probable suicide, no sign of nail gun. Or maybe this finance guy was reading Zero Hedge and got depressed. For the marching on 6 years of Obama - NWO rule, the national debt has increased an average of 1 trillion dollars a year, to over $18 trillion dollars. All that borrowed money has gone to Wall Street. Individual income taxes pay for the running of the government. When a president of a bank or a country is an embezzler, the accountholders get screwed. So it is no surprise that the economy for most of the middle class is heading south, the looters are in charge, the same looters who groomed Obama for the White House.
I wish there were more information as to how the media, including ZH, knows these are suicides instead of murder by tossing them from great heights. Maybe they know too much or about to rat out their fellow rats?
After these policies create flash in the pan super bubbles the crash will wipe out much of what’s left of the middle class.
Depends on what people buy. If the money is used to purchase productive assets the ill effects might be muffled. If it is used to buy stawks, or even worse, for purile consumerism, yeah, super-bubble-tyme.
It is amateurish and draconian at the same time, obviously destined to fail and bring about a dystopian result. So why do we hear it so recurrently in the financial media?
Ban Cash? Ok, you have just 'jumped the shark', then what?
The jig is up and you are in the end game, do they have an end game?
Do they even think about this before they open their big fat mouths?
Who cares? Are we green yet?
Must be that mid-day liquidity issue.. Wait for the closing 30 minutes.
Yep! BTMFD! The new normal "market"
BTFD is old news
we are coming to the end of this cycle
I so hope you are correct. This shit is getting OLD.
Hello
That's what happens in a nation of 98 IQ spendthrifts:
The basic story is well-known to the bottom 90%: most of the household income goes to taxes, housing with granite countertops and several bathrooms, food and drinks at restaurants and transportation - new cars and trucks, with healthcare and insurance, pensions and retirement contributions rounding out the big-ticket items. (Higher education is, as we all know, paid with student loans by all but the top-tier of families since the lower tiers blow their money on vacations, eating out, cable TV and entertainment, manicures/hair, new cars and more house than they need.)
Yep.. Keep the old truck running!
Duct tape and bailing wire forever.....
Its the fees that kill us...they have all gone up quite a bit....from bank fees...to government fees....to condo fees....all have gone up much more than inflation....its a new way of taxing
Hooker fees...
We may see bi-flation here - high end escort fees go through the roof with exponential growth in the $10 whore. The mid-range priced hooker is screwed, so to speak.
Hookers pay condo fees too
" Hookers' lives matter ! "
"its a new way of taxing" <-- WINNER!
That's the entire game over the last 15 -- and ESPECIALLY the last 7 -- years. Need to raise taxes on the youth? Call them "student loans" (which, in the case of the min-payment time-limited ones are IDENTICAL to a new tax). Want to tax Americans for breathing? Call it an "individual mandate" to buy insurance (held up in SCOTUS as, you guessed it: A TAX). Property Tax cap? Pi-shaw! Raise the property values and destroy the market, causing properties to be TAXED at 1.5x to 2.0x their value!
It's FRIKKIN GENIUS!
Gosh, weren't NAFTA and GATT just the best ideas ever? Take all of the high-paying, high value-adding manufacturing jobs and send them overseas to China. Absolutely brilliant, because goodness knows all of the "service economy" jobs that were left behind pay ever so well; especially since now everyone is competing for the few service jobs remaining after the manufacturing jobs got offshored.
Thank you ever so much, Bill and Hillary Clinton, for crushing the working class of this country with your despicable "free-trade" policies. I do hope you both are proud of what you have accomplished, nothing less than the utter evisceration of the American middle class. Some of us have very long memories, and are disinclined to either forget or forgive, particularly when our manufacturing capacity has been throughly gutted.
The elites put Bubba in the WH to pass NAFTA cause they had so much dirt on him to use for blackmail
Monica was sent in to force him to repeal Glass Steagall
"I'm ready for Hillary!" It truly boggles the mind to try to surmise how a fellow human could arrive at that dead end.
Perhaps it just a suicidal moment. Roman was burnt neatly to the ground by Nero. However it is sobering to note he built a massive structure as a monument to himself on top of people's smoldering ashes.
Miffed
Kinda like 1WTC is also built on the ashes of 3000.
Let's be fair and hate the red team too because they voted in favor of NAFTA you narrow minded isolationist.
Just like TPP. They've "set aside their differences" to fuck everybody good.
"Let's be fair and hate the red team too because they voted in favor of NAFTA you narrow minded isolationist."
It's happening again as we speak, Obama is going against his own party to work with Republicans to push TPP through. It's a given that the Republicans are going to want to fuck over the working class, that's a big part of their brand. When the guys who are on the team that supposedly represents working people join up with the Republicans to screw over the working class, that's when it becomes clear that the peasants aren't being represented in any meaningful way.
At some point the peasants are going to become positively surly, and that's when things start to get interesting. Consider the incredibly complex society we currently have. As Scotty so pithily put it, "the more they overthink the plumbing, the easier it is to stop up the drain."
Also, if "narrow minded isolationist" is the name I have to wear in order to not be so gullible as to believe that sending our entire manufacturing base overseas is a good idea, then so be it. I'd rather be called a narrow minded isolationist than be a pliable idiot.
Clinton, Mitchell, Dole, Gingrich, Greenspan all loved NAFTA and bashed everybody that didn't.
Big biz easily bribed politicians here to sell out constitutuents at home and also bribed foreign politicians to sell out their own constituents abroad. Ship the jobs overseas to pollute/exploit and turn around and ship knock-off goods right back here. The joke is on the workers because now they're really not needed and considered obsolete.
The money changers figured out how to print money to themselves and get moar rich buying and selling their own stocks back and forth to each other. I hope I live long enough to see and deliver some payback for the treason. I've said this too many times before. TPP is gonna have a "transaction modernization" feature. Possessing cash will require a license.
I'm just glad to hear something other than pure tea party / neo-con rhetoric once in a while, so thanks for this post. People act like the democrats are satanists, but like the Republicans they're just corrupt dickhead politicians serving the interests of billionaires. Perhaps Democrats are a greater evil in the sense that they appeal to the good nature of a hurting people in order to do evil work, where the Republicans barely try to pretend they aren't garbage humans beyond saying whatever ignorant thing they need to say on Fox to convince John-Ed the farmer that they give a shit about him.
The middle class tends to vote Republican. They were wiped out by design.
I was ready for Revolution 7 years ago when i first awoke to the BETRAYAL.
Still waiting..................
Me too. I'm afraid I'm going to fall back asleep if it doesn't happen by end of 2016. I know this steak isn't real.
"How do you support a consumer economy with stagnant incomes for the bottom 90%, rising basic expenses and crashing employment for males ages 25-54? Answer: you don't".
~ No problem just borrow the money and when the note comes due just roll it over, and over and over. Get a second or third mortage, can't lose there becauses home values always go up! It's like printing money!
We don't need consumers any more. We just need the government to spend more. It solves a multitude of problems:
1. Increases aggregate demand, and who doesn't want that?
2. More government jobs. I.e. government works program, just without the 'works' part
3. Increases the deficit, which creates more government Treasury bonds to finance the shortfall and gives the credit markets the much needed "high quality" collateral they're starving for.
4. With more Treasuries on the market the Fed can launch more rounds of QE.
5. With more QE markets can rise even further.
Everybody wins.
- Paul Krugman
@ No Debt
U R on a Roll
You should write a book! LOL
Damn right!! What we need are huge tax cuts and credits, along with moar massive guv spending!!! Works every time!!! >sarc<
newspeak:
"Every $1.00 in unemployment benefits translates into $1.90 of increased economic activity."
-Rep. James Langevin
well said.
Yes, banks have been captured by banks since they are Self Regulating Organizations.
They do what they want and move assets off the books as fast as they can turn a profit. Don't need your deposits.
- Low Velocity
- 12 years in a Credit Bubble, 17 years of stupid Financing
- Economic dependence on Housing, MIC, Government Projects, Fake Health Industry
- Households leaking Wealth on Health Care, Education, Big Mortgages, Interest Payments
- US Economy Leaking Money to Foreign Trade, Federal Spending Overseas, Foreign Ownership/Investments in the USA, Foreign Ownership of US Debt (Federal Debt), Decapitalization of US Industries, Wealth moving Off Shore
Well the might be a direct relationship between wealth extraction & Economic Leakage as our Dollars flight out of US Hands to the Hands of Foreigners or those operating off shore.
For instance I see new highs in 1984, 1986, 1989, 1994, 1997, 2001, 2006, 2011, 2012:
https://research.stlouisfed.org/fred2/series/GINIALLRH
Households and Nonprofit Organizations; Credit Market Instruments; Liability, Level
2014:Q4: 13,496.88 Billions of Dollars
http://research.stlouisfed.org/fred2/series/CMDEBT
Federal Debt Held by Foreign & International Investors as Percent of Gross Domestic Product, 2014:Q4: 34.75940 Percent of GDP,
http://research.stlouisfed.org/fred2/series/HBFIGDQ188S
Current Account Balance: Total Trade of Goods for the United States©, 2013: -703,911,000,000 US Dollars,
Sum Over Component Sub-periods (2013 was last data),
http://research.stlouisfed.org/fred2/series/BPBLTD01USA637S
http://www.bea.gov/newsreleases/international/intinv/iip_glance.htm (wow huge trend, $31 Trillion in Foreign Property in USA vs $24 Trillion)
Bank Private Credit to GDP for United States
2011: 55.47615 Percent (Data spans from 1961 to 2011, Bubble is clear in 2003)
http://research.stlouisfed.org/fred2/series/DDDI01USA156NWDB
Private Credit by Deposit Money Banks and Other Financial Institutions to GDP for United States, 2011: 189.51640 Percent,
http://research.stlouisfed.org/fred2/series/DDDI12USA156NWDB
I can help with the " Rising basic expanses stuff " Kill the cable ( $200 a month savings ) besides TV sucks and there is nothing on or will you miss anything. Change your CELL plan according to you're usage needs ( $20 - $30 savings ) Turn off all needless electrical usage ( again pending usage $30 - $40 savings a month ) and then comes food, if your eating like a fat pig on all the processed foods Oreo's Doritos and so on your gonna pay for it. Plan your meals cook your meals and you may get a two day serving out of it pending your eating habits ( food cost savings $100 to $120 a month )
Most Americans are gluttons, your only under pressure financially because you want to keep up like the Jonses....life is not about how much money you have or how many toys you have in the garage.
I can't get my wife to cut cable. I tell her "We have Netflix, amazon prime, apple TV, the ability to DL shows, etc - we can do without cable." but heaven forbid she miss one second of manufacted "reality drama" centered around adults with the intelligence and emotional maturity of teenagers. Anyways, I could probably find places to cut back. I live with with luxuries. BUT, I'm young, make decent money, have no kids, and few financial obligations. I'm not hurting, so I don't mind enjoying some things. I agree, though, that money != happiness. Neither does your next promotion, or most of the other things people pretend are important. As long as you can manage a basic level of home, health, and security - you should be able to find happiness within. If you don't have the power to allow yourself to enjoy the present moment, no amount of money or level of fictional success will help you.
Duplicate post. Sorry
+1 "Live Well Beneath your Means". I, too, attempt to live simply and frugally. Eating out is a limited luxury, as my wife is an amazing cook and we are vegetarians (it's a challenge to eat out healthfully). BRAVO!
Turn off the teevee and you might turn away from how you're supposed to live. Health insurance? Me and my family are blessed to be healthy perhaps because we stay out of doctors offices! You can get a smart phone plan for $10-$15 a month...I like old cars because I can customize them and land in the middle of nowhere because I can build a house...and nothing better than growing or cooking your own food. Life is beautiful...but if you go into a welfare office you better be all oh woe is me I don't have enough money to watch the Kardashians...now that person is a true patriot in our economic system...
I'm hearing good things about Friskie's "Savory Shreds with Ocean Whitefish & Tuna in Sauce". Anybody tried it?
Friskies just came out with a new sea lion flavor, but chew thoroughly cuz it's mostly bones.
That reminds me of a story of a Jewish family in New Jersey.
Saul is talking to his cousin Abe and tells him, "Abe you know the Chicken of the Sea Tuna", Abe responds, "Yes, its great'!
"Well ", says Saul, "that tuna costs 2.20 cents a can in the store, I bought a container load of the stuff for 88 cents per tin from a broke goyim."
"Holy Judas" , exclaims Abe, "what a deal"
"Abe", Saul murmers, "I can give it to you for $1.05 a tin"
Abe replied, "Sold"
A few weeks later Abe runs into his brother in law, Hiram,at the local delicatessen. Hiram orders a tuna sadwich.
Abe says, "Hiram, would you like to buy a bunch of Chicken of the Sea tuna for a deep discount?" Hiram looks at him, Abe continues,
"1.25 a tin, but you have to buy a container"
"$1.25", exclaims Hiram, "its $2.20 in the store, you've got yourself a deal, Abe."
About a month later Hiram's wife is getting ready for a big family picnic at the beach. Hiram says to her, "Look don't buy any tuna I've got a container of Chicken of the Sea in the warehouse"
How much did it cost per tin" asked Rebecca, his wife, "It cost $1.25 per tin", answers Hiram.
Rebeccca gushes, "1.25 a tin it costs $2.20 in the store, wonderful"
Anyways, the grandparents, mother, aunts and uncles and 10 or so kids have the picnic. However, about an hour later all of the people who ate the tuna are violently sick.
Hiram calls Abe,"Abe", yells Hiram on the phone, "that tuna you sold me, we had it at the beach today and my father alsmost died. He is still in the hospital in critical condiditon with three grand kids who are terrifically sick. Over 20 of us were sick, right there on the beach. What's going on, Abe"?
Abe responds, "Hiram, Hiram don't you know? That tuna is for selling not eating!"
I like you Kilgore- A man of few words!
Answer: add more consumers, bring in millions of immigrants. Immigration is QE4. We are all getting poorer but there are more of us, so technically GDP can increase. Too easy.
Kind of like employment. 1 full time job = 3 part time jobs. More jobs but everyone is poorer and no health benefits. Hmmm. You are right. This is easy.
I hadn't thought of it that way - good obs!
Agenda 21 wil do away w/consumers.
Protectionism should be brought up again along with strategic Tariffs for National Security of Core US Industries whatever we decide they are...
The great majority of economists then and ever since view the Act, and the ensuing retaliatory tariffs by America's trading partners, as responsible for reducing American exports and imports by more than half.[4] According to Ben Bernanke, "Economists still agree that Smoot–Hawley and the ensuing tariff wars were highly counterproductive and contributed to the depth and length of the global Depression."[5] Republican politicians had originally defended the tariff, but Ronald Reagan denounced it saying, "the Smoot-Hawley tariff. . . made it virtually impossible for anyone to sell anything in America, and. . . spread the Great Depression around the world."[6] However, Alfred E. Eckes, Jr., a political historian, is a dissenter, arguing that Smoot-Hawley had little effect on the severity of the Great Depression.[7]
When it comes to Shocks to Distribution Systems for essential items, Economic Shocks, War Shocks, Energy Shocks, Commodity Shocks... just seems better to be safe.
US should be okay for food & water since we are a bread basket food producer. But we do give away water to Nestle, who then sells it. So the issues have to be examined for Policy stupidity, and that corporations will gouge prices in a crunch and they like that.
US Government is pushing war again. Makes sense to consider what War Reserves we have at home.
Also What are Utilities? People will be crushed if they prices spike due to scarcity in Electric, Water, Natural Gas, Sewer, Water, Heating Oil, ... wood burning and coal burning is becoming illegal adding more pressure on other sources of heat.
Shouldn't we all know what our National Resources are in case we find ourselves in 1931 or 1974 again?
Butt,butt, Deflation.
how can the top 20% be higher than the bottom 90%?
Think of it as a venn diagram with 80% in the left circle, 10% overlapping both circles and 10% in the right circle.
Welcome to the progressive utopia. Progressives been in charge now for quite some time.
There is not a constitutional conservative in sight in FEDGOV now is there?
Embrace the progressive suck and don't forget:
The progressive stupid, it burns.
Grimaldus
If people would properly price the 'credit dollar' generated by the banks in 'legal tender dollars'
Their 'credit dollar' would be worth about $0.04 in legal tender, and that's being generous...
http://carl-random-thoughts.blogspot.com/
everything is so surreal to me
on one hand i know a lot of wealthy ppl, where life is good and they can buy and have whatever they desire and you would never think that there is a recession out there....
one the other hand i know of ppl who struggle;for example, someone at work the other day mentioned having to go to a food shelf because he cannot make it on the income he is getting from work....
i dunno...
Don't expect the poor to do anything about that inequality. It will last until ithe source of wealth for the wealthy collapses.
Yeah I just spent my lunch break in the parking lot watching the janitor give his buddies toilet paper they can't afford. we are all full time and everything is awesome.
But, but, but.... Our iPhones are 25% faster and have 25% larger screens - and they only cost 10% more. Therefore the government can subtract 15% from any real inflation numbers!
Government keeps raising taxes and fees to pay for inflated public pensions while corporations push through H1Bs are pushed to lower wages.
In the mean time corporations raise prices by re-packaging and giving less. All to boost ever-higher profits to justify stock prices.
What if the H1B is replaced by a domestic-educated graduate willing to work harder for less money? That takes the immigrant out of the picture but it still means the older worker is displaced. So now who are you going to blame?
Is this what this site is always like? I mean, I'm fairly new here and I have to wonder if we're uniquely close to a financial collapse or if this site is in a perpetual state of prophesizing immenent doom that doesn't come. I want to be an informed and involved citizen, and I want to have objective truths to work from - not tow party lines or perpetuate someone else's delusions or my own. It's just very hard to know what is true in this information war - when even our insitutions that are meant to be authorities can't be trusted to share factual data. I sometimes think it may be MORE responsible to simply remove myself from the equation than continue confronting political/social/economic issues when my positions could be based on lies/delusions/falsehoods. I'm also inclined to believe that pessimistic information is more real/true than optimistic infprmation.
Any web site that begins by dispensing accurate, usable information will soon become infested with those who muddy the waters. Some of those may be trolls, others may be clueless repeaters of inaccuracies or camp followers, and yet others may join in just to practice cynicism and/or sarcasm. The good, informative comments on ZH are much harder to find than they were five years ago.
At least that's my opinion.