Household Incomes in U.S. Weaken, Threatening Consumer Spending Recovery

[Purveyor]

By Shobhana Chandra

Aug. 4 (Bloomberg) -- Household income in the U.S. is weakening as the influence of the government’s stimulus plan fades, prompting economists, Federal Reserve officials and a Nobel laureate to warn that consumer spending may stumble.

“Consumers have started to change their behavior and they are going to save more,” said Richard Berner, co-head of global economics at Morgan Stanley in New York and a former researcher at the Fed. “You have pressure on wages, you have employment still declining.”

Wages and salaries, which drive recoveries in spending, fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department figures released today. The Obama administration’s tax cuts, extended jobless benefits and a one-time Social Security bonus have helped mask the damage done by the worst employment slump since the Great Depression.

Personal incomes, which include interest income, dividends, rents and other payments as well as wages, tumbled 1.3 percent in June, more than forecast and the biggest drop in four years, today’s Commerce report shows. Excluding the effects of the stimulus plan, June incomes would have dropped 0.1 percent after no change in May, according to the report. In May, one-time additional payments to Social Security recipients boosted incomes 1.3 percent.

One of every 10 American workers will be without a job by early 2010, economists project, shaking the confidence of those still on payrolls and discouraging spending. It may take as long as 15 years for consumers to fully repair finances battered by the decline in home values, stocks and employment, said Edmund Phelps, winner of the Nobel prize in economics in 2006.

Shrinking Net Worth

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BLOOMBERG: http://www.bloomberg.com/apps/news?pid=20601087&sid=aRU6ZUwzT9iA

[NightWatcher]

1. add also: tax revenues are dropping. No one has any money to rebound from the depression

no rebound will happen until the Middle Class is strengthened through jobs and increases in net worth. If no one has any money to spend, how can this happen?

Recovery? we are no where near a recovery.

[cascadiance]

3. And they'll continue to decline as long as they are focused on the average American...

... instead of focusing on those at the top, who are hoarding it all and being taxed so much less than they were in the past, which starting with Reagan which has lead to this situation.

[NightWatcher]

5. and the Fed has fixed the banks (and screwed us at the same time)

the Fed is now printing money and GIVING it to the banks at damn near no charge. Then they offer to store the money for the banks and will pay them 5% interest for doing so. Now the banks have a decision to make, lend the money to Mike for a home that may lose value, or he may default on the loan......OR the bank can just cash the interest checks and payout HUGE dividends to their CEO's and shareholders with no risk involved by keeping their money in the Fed.

They are learning that they dont need us. The rich used to depend on the lower middle class for everything, but now they are realizing that we are not needed. Cheap labor? We'll import workers with H1-B Visas, or ship the jobs out of the country where we can really exploit the workers, or hire illegals for anything "service" related.

[cascadiance]

2. Ultimately we need to flatten the wealth gap for this economy to be fixed!

FDR realized it and did the right things to help that happen! Can we do it now? We don't need temporary band-aids! We need some fundamental changes to people's salaries at the top and the bottom. We need to bring back unions, restore the pre-Reagan tax schedule to have a 70%+ top marginal tax rate, etc. so that we can have more of the real money in the average American's hands not being hoarded by the well-to-do at the top that just use it for power to continue to consolidate their power by buying off our government.

[redqueen]

6. Precisely. (nt)

[Fire1]

4. Well, in 15 years I'll be too old to give a fuck! n/t

[madrchsod]

8. i`m figuring i`ll be dead..

but i hope my kids and grandkids won`t be.

[madrchsod]

7. next year most of the states will be bankrupt because of declining tax revenue

by next spring hundreds of thousands of public service workers will be laid off and 10`s of thousands will be on the streets. the collapse of the public sector will rival that of the manufacturing sector in this country. 2010 the republicans will take the house and gain seats in the senate.


obama has to decide will it be guns or butter. our nation can not have both

[bobw999]

9. I believe it.

I learned yesterday that my friend's full time job was going to be cut to a part time job and she would loose her health insurance. Better than getting fired I guess, but her annual income is now going to be $5,000.

[AsahinaKimi]

10. True story..

I live in San Francisco. People tell me the prices here are high. I was craving a turkey burger the other day, so I went to Mel's drive in, that famous place, that was used to film American Graffiti. When I went in and look at their menu they had on their menu a;

Wild Turkey
Lettuce, tomato, onions, pickle, swiss cheese,
marinated mushrooms, on a wheat bun, plus a side order of french fries.
price: $9.99

Soda: Root beer $2.29
extra mushrooms: $1.25
with tax the total comes out to approximately $15.00!!

I was like, omg! Who pays for a 15.00 burger these days? I could not believe it!

Has anyone ever heard of a 15.00 Turkey burger??