Attention President Obama: One Third Of U.S. Households Can No Longer Afford Food, Rent And Transportation

Tyler Durden's picture

While the Fed has long been focusing on the revenue part of the household income statement (which unfortunately has not been rising nearly fast enough to stimulate benign inflation in the form of nominal wages rising at the Fed's preferred clip of 3.5% or higher), one largely ignored aspect of said balance sheet has been the expense side: after all, for any money to be left over and saved, income has to surpass expenses. However, according to a striking new Pew study while household spending has returned to pre-recession levels (the average household spent $36,800 in 2014) incomes have not. 

Specifically, while the median income had fallen by 13% from 2004 levels over the next decade, expenditures had increased by nearly 14%. But nobody was more impacted than the one-third of households which the study defines as "low-income." Pew finds that while all households had less slack in their budgets in 2014 than in 2004, lower-income households went into the red by over $2,300.

In other words, approximately one third of American households were no longer able to cover the core necessities - food, housing and transportation - with average income. 

According to Pew, households spent more in 2014 than they did in 1996, after adjusting for inflation; this holds whether the figures are based on averages (means) or medians. The typical household saw its expenditures grow by more than 25 percent, from $29,400 in 1996 to $36,800 in 2014. Mean expenditures grew 27 percent since 1996, rising from $43,200 to $54,800.

The problem is that incomes have not kept up: from 2004 to 2008, median household income grew by only 1.5 percent, while median expenditures increased by about 11 percent. During that period, the expenditure-to-income ratio (the percentage of a household’s budget used for spending) jumped by 9 percent. As the recovery began, median household expenditures returned to pre-crisis levels, but median household income continued to contract. By 2014, median income had fallen by 13 percent from 2004 levels, while expenditures had increased by nearly 14 percent. This change in the expenditure-to-income ratio in the years following the financial crisis is a clear indication of why and how households feel financially strained.  


 

Worse, as the chart below shows, in 2004, typical households at the bottom had $1,500 of income left over after expenses. By 2014, this figure had decreased by $3,800, putting them $2,300 in the red. As Pew notes, "the lack of financial flexibility threatens low-income households’ financial security in the short term and their economic mobility in the long term", and as we would add, this makes them effective wards of the state to be manipulated by demagogue politicians with promises of free handouts.  

But perhaps worst of all is that typical U.S. households in the center of the income distribution range, aka America's true middle class, have seen their income after meeting all expenses (aka leftover savings) plunge from $17,000 in real terms a decade ago to a paltry $6,000 as of 2014, a plunge of 65%!


 

What was the reason for this big drop in residual income and jump in expenses? According to Erin Currier, project director at Pew Charitable Trusts, "over time, [lower-income groups] consistently spend more on transportation and considerably more on housing."

However, the biggest culprit by far, are soaring rental costs: "Lower income renters are spending nearly half their income on rent, while upper-income groups spend about 15% on rent. The disparity really shows that lower income families don’t have much slack in their budgets for mobility-enhancing investments like savings and wealth building."

 

What is particularly notable is the substantial jump in median expenditures in just 2014. This was mostly due to an odd spike in rents:

For a typical family of four (two earners and two children), while median household income increased by about $10,000 between 1996 and 2014, annual expenditures also increased by about the same amount, driven largely by higher spending for core needs: housing, food, and transportation. Although the absolute change in income and expenditures was similar, this family had less slack in its budget in 2014 than in 1996, as its expenditure-to-income ratio grew from 71 percent to 75 percent.

The reason for record high asking rents has been extensively covered here before; here is Pew's take:

Since the start of the housing crisis in 2007, homeownership rates have declined among households in the middle- and upper-income tiers. These decreases have affected the rental market, as former owners became renters, leading to rental vacancy rates at historical lows below 7 percent. The diminished supply of rental properties increased the cost of rental housing dramatically; in 2014, renters at each rung of the income ladder spent a higher share of their income on housing than they had in any year since 2004. Although both renters and homeowners spent more for housing in 2014, notable differences in the proportion of household resources going to shelter were evident across income groups, with lower-income renter households spending close to half of their pretax income on rent.

This, together with our previous report that increasingly more US households are unable to afford to purchase a home, should put to rest any speculation whether those who point out the chronic deterioration of the economy for everyone, not just the 1% who truly are doing better than ever, are "peddling fiction." 

Pew's conclusion confirms just that.

The amount of slack that families had in their budgets declined for all income groups between 2004 and 2014. This means households had less income to devote to wealth-building investments, such as short- and long-term savings, education, and life insurance. In 2004, the typical household in the lower third had a little less than $1,500 left over after accounting for annual outlays. Just 10 years later, this amount had fallen to negative $2,300, a $3,800 decline. These households may have had to use savings, get help from family and friends, or use credit to meet regular annual household expenditures. The typical household in the middle third saw its slack drop from $17,000 in 2004 to $6,000 in 2014. Of note, because income is measured before taxes, some families will have had even less slack in their budgets than this figure implies.

One final note: in the paragraph above replace "slack" with "savings" for an accurate description of what is going on.

Source: Pew Trusts

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HectorCamachoTrump's picture
HectorCamachoTrump (not verified) Mar 30, 2016 2:40 PM

This is why israel is invading Palestine, NATO is moving away from turkey, Russia is in Syria (in a modest amount lets be honest) yadda yadda yadda.

The jews want war folks.

Only way to prop up the false narrative of "democracy".

new game's picture

what if 18 year olds said, "fuck off old man, go fight your wars, you cocksucker".

just sayin...

motorollin's picture

Excuse me, you can't swear in an college kid's safe zone.

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) motorollin Mar 30, 2016 3:22 PM

"Attention President Obama: One Third Of U.S. Households Can No Longer Afford Food, Rent And Transportation"

WTF?  You don't think Dear Leader knows this?  It's his exact plan.  It means he can push for and implement MORE, BIGGER, gubmint. And Free $HIT For Everybody!!! Just vote the correct way...

How's that doubling (or more) of you insurance premiums, and many thousands of dollars until your deductible limit is reached, Obamacare working out for you?

Nutsack's picture

EARTH TO "SLOW TYLER"...... Obama considers this a HUGE SUCCESS!

 

 

Didn't you bother to read his book either?

WTFRLY's picture

Joo World Order finds a way

Nutsack's picture
Nutsack (not verified) WTFRLY Mar 30, 2016 4:19 PM

Lots of down arrows, yet ZERO cowards telling you why you are wrong!

 

The socialist jew media has programmed the weak minded to attack any time someone dares speak the truth about the greedy, lying socialist jews.

Gather those rosebuds's picture

The only reason to bring this to Obama's 'attention' is to let him know the plan is working. 

https://en.wikipedia.org/wiki/Cloward%E2%80%93Piven_strategy

Are there actually people who still don't realize that this is the plan?

Groundhog Day's picture

its open enrollment 

Plan A (the Best) is 2443.13 for my family of 5

Plan R(the one i took, mediocre plan where your screwed to the tune of 25000 max if your caught in trouble out of network) is 1209.50 / Month  - plus 100 a month for dental and 40 a month for vision for a grand total of 16188.00

5000 for dependant care

1000 for HSA plan

Thats 22188 taken out.  #fuck Obamacare

Seasmoke's picture

Say what !!!!!!!!! Are you fucking kidding.

How are people not rioting as of yet ????

Debtpool's picture

Maybe you'd do better if you learned to spell and use punctuation. Your =/= you're.

Groundhog Day's picture

Ah yes,  I'd do much better at the hospital seeing patients if my punctuation on ZH was accurate

Countrybunkererd's picture

If you are in the medical field, especially if you are an MD, HOW IS IT that you didn't scream f*ing murder while they rammed it down our throats?  WHERE exactly were you when they called it affordable?  Do they not teach ANY business courses when getting an MD?  Did all MD's expect a windfall of income from the .gov and just shut the f* up?  Just wondering, because i blame the medical community AND health insurers just as much as i blame Odumb@$$, well almost as much.  And yes, Odumb@$$Care needs flushed.  It stinks worse than...

Mr. Universe's picture

Most of the MD's think it's a scam as well but they are too busy filling paperwork evertime they scratch their balls. They also are indentured servants with student loans up the wazoo. The system, along with Big Insurance have Doctors firmly under their thumbs.

Jack's Raging Bile Duct's picture

I was a paramedic and worked in cardiology while in undergraduate school. I knew alot of doctors who thought single payer was the right way to go. The problem was that I worked in a hopsital--so most of the MDs were not managing a practice, they were employees. MDs who operate out of their own practices know full well the disfunction of the USAs current system, and how single payer won't solve it.

They do no teach business management in medical school. Frankly, I'm not sure I'd want them to. Regardless, they have no more say on the matter than we plebs, so your outrage towards the other poster is in vain.

Syrin's picture

The Fuhrer upon hearing these numbers:  "Mission accomplished".

pebblewriter's picture

Wouldn't you know, TPTB have a solution for that:  "Knowing and willful refusal to present oneself for and submit to registration as ordered is punishable by a maximum penalty of up to five years in Federal prison and/or a fine of US$250,000"

darteaus's picture

That sentance is way to long for a real 18 year old to say.

Duc888's picture

 

 

 

Hope and change.  Ayup.  "I will fundamentally change the United States".  He sure fucking did!

de3de8's picture

Like he could care less

Countrybunkererd's picture

oh he cares, he is proud of it.

Two Theives and a Liar's picture

No worries. Soylent Green will be very affordable!

Sudden Debt's picture

So what will they do? Post an angry smiley on facebook?

The servs are trained well. They know how to suck it up.

And just to keep the rest in the dark about what's comming, let's prop up the markets a bit more and keep living in denial.

I wonder when Americans will realize they live in a North American 3rd world country.

FreeShitter's picture

They wont. They have and will accept whatever is thrown at them from their luciferian overlords. The time for them to wake up is long gone.

Countrybunkererd's picture

Some might.  It will occur to them when they move from the home to an apartment and have to sell (or throw away) 3/4 of all their stuff in order to fit it in.  The rest will never know until their (do nothing and keep quiet) checks stop coming in or their card isn't accepted anymore.

Wait What's picture

45 million: how many Americans are still participating in the SNAP program. hope & (spare) change is all you get, plebes.

Vlad the Inhaler's picture

Pretty basic math here, we have a central bank is that is trying its hardest to create inflation while at the same time keeping interest rates at zero, in other words: fucking the man on Main Street.

corporatewhore's picture

Why can all my EBT customers get sodas and crap food like Fritos on EBT and still have money to buy scratch offs, shots of American Honey or Smirnoff, 'rillos or Kools and get loyalty card points with their purchases?

Obviously the author has never worked in a gas station and seen American ingenuity at work.

new game's picture

drip, drip. and tic toc...

buzzsaw99's picture

yeah but you can buy forever stamps with ebt bitchez

post office machines don't take cash but they do take ebt

that's fucked up.

scintillator9's picture

What a coincidence that this happens around the time of ZIRP.

It is all about FLOW, as in CASH FLOW.

I would bet $100 that these statistics would not be nearly as bad if the Fed Fund Rate never dropped below 3% after 2008.

But, every single one of us on this board has been robbed, through lost interest earnings.

All that did was essentially corral everyone into the "market" to chase yield and returns (FLOW) that once was very low risk.

new game's picture

i be bitchen, bitchezzz.

theft 24/7; the cocksuckers..

sixsigma cygnusatratus's picture

Fortunately for .gov, food, rent and transportation are no longer part of the consumer price index. Just iPads.  Phew, that was close!

 

...and from the Fed's perspective, if people squander their money on food, rent and transportation instead of buying perfectly affordable iPads, well that's their problem.

PerkyPooper's picture

This is very scary.

Theonewhoknows's picture
Theonewhoknows (not verified) Mar 30, 2016 2:54 PM

It is interesting how similar this blueprint http://independenttrader.org/the-blueprint-of-the-fall-of-europe.html is to what happens in the US. Also with this amount of debt - militarisaton and capitalisation of military - WAR - means you dont pay the debt - for example shale bond bubble (student loan bubble and others) - Think!

jack beauregard's picture

It's a good thing health care is not affordable, or we'd all be out on the streets protesting the misdoings of the government.  Actually, those in the government should be very thankful that we're a civilized country and not yet a banana republic. Otherwise, we'd have had a coup by now.  

Dg4884's picture

right?!  Queue the daily internet reward.

Lost in translation's picture

We fundamentally changed some folks.

apike3137's picture

"taxes too high, wages too high"

 

https://youtu.be/MbZ-o1T6F5Y

- Donald Trump

FreeShitter's picture

Just think, these are the good times now.

Countrybunkererd's picture

Yep!!! A shitstorm of socialist utopian shared misery for everyone is just around the bend.  You will be taxed into nothing if you have it and rationed to misery if you don't.  What a fucking joke the USA has become.  Absolute stupidity everyfuckingwhere.  Socialists should spend a month, or year in Cambodia, China, or N Korea to see what REALLY happens when everyone gets the opportunity to share their wealth with others.  Absofuckinglutely Pathetic...Merry Christmas and Happy Hanukkah.

MFL8240's picture

And the American people want 4 more years of this with Clinton, Cruz or Kashich?  Sanders would make it where 90% would be in the street!

Countrybunkererd's picture

no, 97% would be in 4x9 cubes (or 3x6 if you don't want a kitchen and storage area - you get an increase of one meatball a week for a total of two meatballs if you go small).  the 3% are .gov and friends, Inc.  The fact that he gets more than 3% of any vote should scare the living shit out of everyone, I MEAN EVERYONE.

conraddobler's picture

Let them eat cake.

Countrybunkererd's picture

That's so 18th century.  Let them eat shit is the new and improved (via a smartphone) version.

Die Weiße Rose's picture

more corporate welfare ?

Boeing announces massive job losses by mid-2016

 

Boeing's commercial airplanes division will take the biggest cuts as about 4,000 jobs are to go by mid-2016.

On top of that, the planemaker announced Wednesday that another roughly 550 jobs would be lost in a division that conducting flight and lab tests.

Among the job cuts, some 1,600 positions in the commercial airplanes division were planned to be made redundant through voluntary layoffs,

while the rest of the cuts were expected to be completed by leaving open positions unfilled, spokesman Doug Alder said.

"While there is no employment reduction target, the more we can control costs as a whole the less impact there will be to employment," Alder told the news agency Reuters.

The job cuts would affect about 3 percent of the company's 161,000 workforce and also included hundreds of executive and managerial positions, Boeing said.

http://www.dw.com/en/boeing-announces-massive-job-losses/a-19151336

WR;)

HappyCowboy's picture
HappyCowboy (not verified) Die Weiße Rose Mar 30, 2016 3:22 PM

Good looking chicks in managerial positions will be spared.