
The Mighty U.S. Consumer Is Struggling - paulpauper
https://www.bloomberg.com/opinion/articles/2019-05-08/the-mighty-u-s-consumer-is-struggling
======
mdorazio
In addition to the no-surprise explanation of the "tax cut" not being an
actual cut at all for most people and the uptick in household interest
payments (likely driven by student loans and increased housing prices in many
markets), the key takeaway quote for me is:

"two-thirds of April’s new jobs were generated in lower-wage services
industries such as administration and support services, health and social
services, leisure and hospitality, among others. The flip-side of this dynamic
is that high-paying job growth has been nearly halved to 1.6 percent since
peaking in 2015."

I've been trying to explain to people for years now that reduction in
unemployment does not mean people are getting good jobs, it just means people
are getting _a_ job that employs them "full-time" with or without benefits,
livable salary, etc. The data here supports that: "good" job growth is far
outpaced by low-quality job growth.

~~~
djrogers
> In addition to the no-surprise explanation of the "tax cut" not being an
> actual cut at all for most people

Justify that statement please. Every single study of the 2017 tax cuts has
shown that the vast majority of Americans did in fact get a tax cut. Every.
Single. One. Even the New York Times admits as much. Either you haven't really
looked in to this at all, or you've bought some policital rally baloney that
is completey ungrounded in truth.

[1]
[https://www.nytimes.com/2019/04/14/business/economy/income-t...](https://www.nytimes.com/2019/04/14/business/economy/income-
tax-cut.html)

~~~
toomuchtodo
From your link:

> The middle fifth of earners got about a $780 tax cut last year on average,
> according to the Tax Policy Center.

> The top 20 percent of earners received more than 60 percent of the total tax
> savings, according to the Tax Policy Center; the top 1 percent received
> nearly 17 percent of the total benefit, and got an average tax cut of more
> than $30,000. And that’s not even factoring in the law’s huge cut to
> corporate taxes, which disproportionately benefit the wealthy households
> that own the most stock.

Hence (rightfully so) pitchforks. The average American taxpayer was
bamboozled.

~~~
WarDores
But since the top 20% of taxpayers pay 87% of income tax[1] and the top 1% pay
37%[2], this makes total sense.

1: [https://www.wsj.com/articles/top-20-of-americans-will-
pay-87...](https://www.wsj.com/articles/top-20-of-americans-will-pay-87-of-
income-tax-1523007001) 2: [https://taxfoundation.org/summary-latest-federal-
income-tax-...](https://taxfoundation.org/summary-latest-federal-income-tax-
data-2018-update/)

~~~
toomuchtodo
But it’s not how it was sold. The absolute number is not the issue, but the
optics. I have seen this first hand with Trump supporters (extended family)
who are having an unpleasant tax filing season (owing when they have never
owed before) and feel lied to. I have delivered the bad news that their tax
burden was already so low, how would they expect their tax cut to be generous?
Like I said, optics.

EDIT: _I_ know how tax refunds and liability work, but I am not the general
public.

~~~
taxlawthrowaway
If you have to pay more or your refund is lower, that's a good thing. That
means you paid less money in taxes.

The government holding onto your money until the end of the year is not a good
thing. You'd be better off saving that money and investing it.

------
eledumb
Real wages are dead flat for decades, everything else costs more so purchasing
power is significantly reduced. The middle class is shrinking. For a lot of
Americans it's a really bad time.

~~~
eanzenberg
The American middle class is shrinking because the majority are moving into
the upper class, while the lower class remains constant. There's plenty of
reports on this, check out intragenerational financial mobility.

~~~
defterGoose
So many reports that you didn't bother linking to one? I'm sorry, but this
seems heinously misinformed given that our debt/equity ratio keeps growing.

~~~
adventured
The Fed's figures indicate it's entirely correct. What's actually happening is
an increased bifurcation of outcomes in the US based on race and education
levels.

Educated Whites, Blacks, Hispanics and Asians have all done well over the last
decade.

For example, the median household net worth of a Black household with a four
year degree or greater, increased by nearly 90% in just three years with the
economic recovery from 2013 to 2016 (stocks and real-estate values). Educated
Hispanic households saw a similarly outsized increased in their median net
worth.

The median net worth of an educated Black household, is now considerably
higher than the median net worth in Germany or Sweden. The same is true for an
educated Hispanic household.

However, without that education level, Black households see a drop of ~83% in
their median net worth figure. White households without a four year degree or
greater, similarly see an ~80% drop in their median net worth.

The average net worth of a White household without an education, was $367,000
as of 2016. With a bachelor's degree or higher, it was $1.8 million. Median
was $98k vs $397k.

The gains have mostly gone to educated households. That has produced an
economic gain bias in favor of White and Asian households (which tend to have
greater / easier access to higher education). That effect has pushed White and
Asian households up the class bracket over the last four decades.

This is fundamentally why the US middle class has been spinning its wheels.
You're seeing White and Asian households move up and out of the middle class,
and Hispanic households move in, while Black households have been stuck with
only very modest progress.

[https://www.federalreserve.gov/econres/notes/feds-
notes/rece...](https://www.federalreserve.gov/econres/notes/feds-notes/recent-
trends-in-wealth-holding-by-race-and-ethnicity-evidence-from-the-survey-of-
consumer-finances-20170927.htm)

------
zaroth
I’m having trouble squaring the claims in this editorial with the following
fact from the Personal Spending data;

> _Personal saving was $1.03 trillion in March, and the personal saving rate,
> personal saving as a percentage of disposable personal income, was 6.5
> percent._

That seems incredibly robust considering negative personal savings rates of
the past.

Increased personal spending is the best sign we have that consumers are _not_
struggling. Up is down?

~~~
allmaypar
I think the author is cherry-picking numbers to support her thesis. In any
case, here are some opposing views:

U.S. consumer spending surged 0.9 percent in March, the biggest gain in nearly
a decade, as inflation pressures remain non-existent.

The March gain in US consumer spending was the biggest monthly increase since
August 2009, the Commerce Department reported April 29. while inflation rose
just 0.2 percent and has risen only 1.5 percent over the past 12 months.

[http://www.alaskajournal.com/2019-05-01/us-consumer-
spending...](http://www.alaskajournal.com/2019-05-01/us-consumer-spending-
surges-09-percent-march)

Average hourly earnings in April were 3.2 percent higher than a year earlier,
the ninth straight month in which growth topped 3 percent, the Labor
Department

[https://www.nytimes.com/2019/05/02/business/economy/wage-
gro...](https://www.nytimes.com/2019/05/02/business/economy/wage-growth-
economy.html)

~~~
zaroth
Here's an interesting observation on MarketWatch;

> _Income was subdued. The slight 0.1% gain in March follows a 0.2% gain in
> February and a 0.1% fall in January. Year over year, personal income is up
> 3.8%, moderate by historical standards. Disposable income was flat in
> March._

> _The weakness in income was concentrated in proprietors’ income. Wages and
> salaries rose 0.4% in March after a 0.3% gain in the prior month._

It makes sense that strong job growth at lower incomes, and low-income wage
growth, would squeeze proprietors' profit margins, but if it were merely
redistributing income, wouldn't the overall rate stay the same?

EDIT: I think if you look at Table 1 in the full report it gives better
context. [1]

[1] -
[https://www.bea.gov/system/files/2019-04/pi0319_0.pdf](https://www.bea.gov/system/files/2019-04/pi0319_0.pdf)

------
adventured
"As for what’s pushing households to tap into their rainy-day funds, Deutsche
Bank recently pointed to the 15 percent year-on-year increase in household
interest payments. Levels of payments rising at a similar pace preceded the
onsets of the last two recessions."

That's a pretty far fetched setup when you examine the actual facts of
household debt interest payments.

Given the bearish angle of the article, households must be seeing soaring debt
interest payment costs, right? They must, the article is pushing that very
claim.

Fact: household debt service payments as a share of disposable income were at
40+ year lows, at 9.88% in 4Q2018. That's according to the Federal Reserve.

Since Nixon was President, US households have not struggled less when it comes
to debt service costs.

Let's examine how today's figure compares to the past. It must be quite high
and indicating a drowning consumer, surely.

During the roaring 1990s, the lowest that ever got was 11.4% in 1998. It was
up to 12% by 4Q2000, far beyond where it's at now.

The best it ever got in the 1980s, was 10.2%, in 4Q1980.

Peak economy prior to the great recession, in 2005 and 2006, it was up at
12.5% +/-. Again, far higher than it is now.

In 1Q2013, it was at 10.2%. In 3Q2016, it was up at 10.07%.

Ok, but wait, households must be loading up on debt, right? They must be in
terrible shape.

Nope. Total household debt as a percentage of disposable income, is sitting
back at 2003 levels, prior to the insanity of the housing bubble. It has seen
no large run-up increase yet (typical of what happens leading up to the time
just before a recession). Here's what that looks like:

[https://i.imgur.com/fWGzgYJ.png](https://i.imgur.com/fWGzgYJ.png)

The article is intentionally dropping context.

------
nostromo
> Deutsche Bank recently pointed to the 15 percent year-on-year increase in
> household interest payments. Levels of payments rising at a similar pace
> preceded the onsets of the last two recessions.

That's because the Federal Reserve caused the past two recessions. First by
allowing an asset bubble to form, then by overreacting and driving the entire
economy into recession.

It's strange how Bernanke is lauded as some hero that saved us from the Great
Recession. I've heard quite a few smart people, people like James Grant,
identify him both the savior from, and a cause of, the Great Recession.
Curiously I only hear about their successes in the recovery and not their part
in the crash.

------
munk-a
The outline, for reference:
[https://outline.com/3uNMyr](https://outline.com/3uNMyr)

~~~
supergauntlet
Don't take this the wrong way because I'm genuinely asking - how is this
useful? All this does is cut out the sidebar/header content along with the
graphs. I hate bad web design as much as the next guy especially on text and
pictures websites, but I don't get what the site you linked is trying to
accomplish.

~~~
munk-a
Mostly it's just to make articles (text content) readable as their text
content.

I, personally, have little patience for being advertised to or being asked to
check out "interesting related content"... someone linked an article they
thought was worth reading so I wanted to read it, this makes reading the
article as simple and direct as a plain text file.

I linked it here because I know other folks enjoy it and I thought it'd be
considerate to minimize the number of times the article needed to be reparsed
to strip out the weird bits.

------
VinLucero
Did you know that financing for the lower class can be as expensive as 25% of
their monthly budget. Simply borrowing money has an average APR on payday
loans of 400%.

People choose these loans because:

1) the simple dollar costs mask the actual APR due to relatively complex
calculations. 2) the effective APR of multiple $40 overdrafts is actually
higher cost than a 400% payday loan.

Long story short, these people are acting rationally in an irrational system.

Fortunately, I am a former Credit Karma employee and am working on a solution
at:

[https://www.piggycreditcard.com](https://www.piggycreditcard.com)

Please sign up and earn 5% on your checking account.

How can I do this? By arbitraging the risk-adjusted loan probability across a
portfolio of 28% APR alternative loans to those in need.

Think of it like socially conscious lending and open source banking.

------
throwayEngineer
Between these indicators and the constant discussion with multiple Fortune 500
companies about the China Tariffs, I'm bearish.

Expecting that debt will domino and cause worldwide Economic depression.

~~~
zaroth
Bearish you say? How is that working out for you?

The S&P is up nearly 15% YTD.

~~~
throwayEngineer
Yes, and I think those invested in the last year are going to lose big.

I believe in the 7% yearly number we were taught. But I also can see the
economy is damaged.

~~~
klipklop
Isn't the annualized average return rate ~9% for the S&P 500? If you had money
in the game for years a 20-ish% correction is not really a big loss.

~~~
titanomachy
Maybe inflation adjusted.

------
apo
> Mortgage lenders are reporting similar strains. According to Knight Black's
> latest Mortgage Monitor, a typical first quarter sees the national
> delinquency rate decline by 15 percent as borrowers use tax refund proceeds
> to catch up on their household finances. The first three months of 2019,
> however, marked the smallest drop in delinquency rates since 2009.

Zoom out:

[https://fred.stlouisfed.org/series/DRSFRMT100S](https://fred.stlouisfed.org/series/DRSFRMT100S)

There's a nearly unbroken downward trend back to 2010.

Also, it would be nice if the article reported the Q1 2019 drop. The Fed data
doesn't appear to show an unusually high drop during any quarter.

------
strict9
>As for what’s pushing households to tap into their rainy-day funds, Deutsche
Bank recently pointed to the 15 percent year-on-year increase in household
interest payments. Levels of payments rising at a similar pace preceded the
onsets of the last two recessions.

Maybe this isn't what the article is referring to, but assessments have
skyrocketed in my city as they have in every other city. That means higher
property taxes and a noticeably higher mortgage payment every month.

I can absorb it but wonder how much it can keep going up before something
buckles and a lot of people can't keep absorbing the increases.

~~~
djrogers
Property tax assessments are not tied to your mortgage payment - if your
mortgage payment changes monthly you've got a bad mortgage.

Also, before you assume a local factor is influencing _national_ spending,
keep in mind that the way property taxes are assessed isn't universal - for
example in California, your property tax assessment can only go up by 2% /yr -
so it's not possible for them to 'skyrocket'.

~~~
Junk_Collector
He is probably referring to the fact that most people pay their property taxes
out of escrow holdings along with their property insurance. Payment into the
escrow account is part of your monthly bill and is rolled up into the
"mortgage" payment even if it is not actually part of the mortgage. Most
people won't even request these broken out by line. In those situations, you
would expect your monthly payment to change year to year based on property tax
assessment.

Since it seems that many people can't differentiate between total tax rates
and tax refunds, it seems reasonable to assume that people would consider
their property tax escrow part of their mortgage payment.

------
thrower123
I don't know. It seems to me that prices of most consumer goods have crashed
so incredibly in my lifetime that it is almost unbelievable. I went into Wal-
Mart today, and there is stuff on the shelves that I would have thought
incredible luxuries twenty years ago selling for $15.

Combine with an aging population, that has amassed a considerable amount of
"stuff" over their lifetimes, we may be getting close to peak household
consumption.

------
nostromo
> Adjusted for inflation, personal income excluding government transfers
> peaked in December and has declined at a 3 percent annual rate over the past
> three months.

So, it declined 0.25% between December and March? Or like, $40 a month for the
median US worker?

Oh wait, they adjusted this figure for _three months_ of inflation, so it's
more like... no change at all.

~~~
SketchySeaBeast
Generally, and especially given the tax cuts, one would expect a strong
economy to have an increased personal income, wouldn't they? Especially when
the GDP is supposed to be INCREASING at a 3% annual rate?

Also, the inflation rate so far for 2019 has been 1.9%, so that's not no
change at all.

~~~
nostromo
The tax change has been in effect for a year now.

And, yes, that's my point regarding inflation. A 3% annualized change,
adjusting for 2% inflation, is a 1% annualized change. While that may be
interesting if sustained, over a few months it's not evidence of much of
anything at all.

------
tmaly
I have been noticing food prices in general going up.

Just tonight, I bought a 5 gallon water refill and it was $1 more

------
ficklepickle
At some size, somewhere around 100-1000 employees perhaps, corporations lose
their humanity, the sociopaths move to the top and the race to the botttom
begins, IMHO.

Amongst lower-paying employers, SMEs (small- and medium- enterprises)
generally provide better quality jobs. This is because they haven't lost their
humanity yet and somebody there actually cares about their employees. They
often have more opportunities for advancement and learning, possibly because
roles are less well-defined and smaller orgs tend to need more generalists.

If we really want to help the average consumer, we should offer incentives to
SME's rather than mega-corp's.

Obviously, this is just in my experience and I have 0 data to back this up.

~~~
cadence-
SMEs don’t have enough money for effective lobbying. Most laws are constructed
in a way that satisfies lobbyists, since they are the ones providing money to
politicians. Those are overwhelmingly big rich corps. The most successful
politicians are those who can implement what lobbyists want and frame it in a
way that makes general populace consider it to be positive.

------
SubiculumCode
This is why I support Andrew Yang's Freedom Dividend UBI proposal.

Edit: I want to explicate further, but am on my phone. Perhaps the Yang Gang
can jump in?

------
mjevans
This might seem counter intuitive, but think about things like this.

The cost of everything is going up; so many propose raising the minimum wage
to compensate. This will provide some additional money to those beneath the
minimum wage. However the price of literally everything will grow to consume
that additional wage. In essence what raising that wage does is to devalue the
dollar, meaning anyone not seeing a wage increase is actually being paid less
relatively.

The only winners in raising such a wage are those that seek rent from others.
The land owners, the business owners, the 1% and maybe even just the 1% within
the 1%.

The actual solution, the way to increase the QUALITY of life, not the numbers
on balance sheets, is to increase the size of the market. Remove arbitrary
numeric limitations on workers entering a field (E.G. the monopoly on doctor
training slots). Consolidate red tape and ensure that if predictable pre-
conditions are met housing projects are approved. Also use actual civic
planning, zoning, and land-value taxation to encourage high quality, higher
density, and strong community development. Probably making more condos and
making it easier to buy and sell housing.

~~~
vkou
This is false.

Raising the minimum wage only affects a small % of employers. In industries
that pay minimum wage (retail), labour is often a small % of overall expenses.

The impact of bringing a few people out of poverty is fairly minimal.

Also, many expenses are completely independent from minimum wages. Housing is
a great example. It's price is determined by access to credit, and
macroeconomic trends that have nothing to do with how much a Starbucks barista
gets paid. Medical costs are another great one. Nobody in the healthcare
industry gets paid minimum wage.

~~~
Shivetya
TL;DR at bottom

define small, so about twenty percent to labor is small? start inching up from
there and many get scared quickly. plus it won't move many out of poverty what
it will do is move many who are not employable out of a job. the people you
hire at $15 are going to be held to a higher standard than those you would
accept at $8, $9, or even $10. Plus you will get people come out of the wood
work would never have considered "stooping" to such a job but for $15 an hour
its fine then.

So Mr Tattoo who has a bit of an attitude problem but you take him because he
is available for $8 isn't someone you will let cross the threshold at $15.
Little Ms May who is always late or out sick will be on the other side of the
counter. Why, because once you break a mental threshold in pay you get people
who would not had considered working there. Now they won't all be seeing a
career but they will see a job that is worth their time.

You want to help those in poverty. Then get government off their backs. From
expensive government services and fees, to ordinance inspectors who troll poor
neighborhoods, to the cops and legal system who prey on the very same. That
$20 bucks you paid to update your license could be make or break it for some
and that is just the tip of the ice burg. More low paying jobs are in
regulated occupations which forces the poor to incur debt just trying to get
licensed to work.

TL;DR $15 an hour won't change the attitude of those demanding it, they will
feel even more entitled because they are not suited for employment. Won't
matter because it will bring out those who are.

~~~
mjevans
For reference, I disagree with this logic as well.

Another way of stating my point is that instead of artificially pegging things
'to the unit of currency' they might instead be pegged as fractions of a
"minimum wage", as the econ101 curves will predict a given percentage of a
base individuals budget goes to X, and if raising their budget then the cost
of X follows that raise.

If yesterday W made 2 times minimum wage, X 5 times, Y 10 times, and Z 100
times, then the minimum wage is multiplied by 2: maybe next year or shortly
after... W now makes about 1 times minimum wage, X about 2.5, Y about 5, and Z
about 100. Z, BTW, makes money by renting things out instead of directly
working for someone else.

