Unemployment is down. Spending is up. Inflation is manageable. Taxes are down. Demand for new homes is up. Household wealth is higher.
So how come many Americans are not feeling secure, even though the last major recession is nine years in the past? Too many of them are falling into categories where high child care costs wipe out the advantages, or the expanding costs of travel wipe out any pay raises, or those pay raises have not materialized, or . . .
Analysts at Oxford Economics who studied American spending patterns found that those in the bottom 60 percent of earners were drawing from their savings to maintain a standard of living. Many are living paycheck-to-paycheck. Even those who have found jobs as the jobless rate dipped are not feeling financially secure.
Here’s how the current economy looks to these folks:
Even though inflation is not a current concern, the prices of some indispensible items is rising. Gasoline is up 24 percent since a year ago. That can eat away as much as a third of what people hoped to save.
Owning a home has become harder, not easier. Many areas of the country are seeing a dearth of listings in the affordable range. Prices are rising more than 6 percent annually overall and even higher in some areas, increases that effectually wipe out the 2.7 percent increase in most hourly wages. Thirty-year fixed-rate mortgages are growing costlier. Average interest rates have jumped too 4.62 percent, from 3.95 percent at the beginning of this year.
At the root of the problem is the decline of America’s middle class. Wealth is increasingly lop-sided, with the ultra-rich sector growing while those at the other end of the scale see little benefit from the great economy. The top 10 percent of the country controls 73 percent of the personal wealth. The gains are concentrated in the top 1 percent, which lays claim to 39 percent of the wealth.
Where the middle class once included some 40 percent of the overall population, the figure now is just 27 percent. In the lowest 40 percent, Americans have a negative net worth and few have cushions sufficient to offset an emergency. They can’t look to stocks, rental properties, capital gains or home equity to shore up the budget if needed. Hourly wages haven’t risen over the past year for most of them.
Times are particularly tough for people who lack an advanced educational degree. Those who ended their education with high school find themselves scrambling as most of the jobs go to college grads. Those minimally educated make up less then 1 percent of the job gains that have boosted the overall economy.
At the same time, it isn’t all rosy for those with a college degree. Ever-higher student debt has wiped out some of the advantage. Since 2004, total student debt has increased 540 percent to a startling total of $1.4 trillion. That doesn’t include graduate school debt. That debt is influencing the ability to buy homes. Realtors have reported home-buying delays of about seven years among those burdened with education debt. College graduates dealing with debt also tend to delay the start of families, another factor that impedes full economic health in the country.
Children are, in fact, very expensive. Nearly a third of families put out at least 20 percent of their income for child care. Some families go into debt to cover child care expenses. Average cost of care for one child is $10,486 a year and it can be as high as $20,209. Many women have dropped out of the job market to stay home with children rather than pay the high costs of outside care.
The percentage of American women in the workforce has dropped from 77 percent in 2000 to 74.8 percent now. A return to the higher figure would see some 1.4 million more women in the workplace.
So while the economy appears in print as encouraging, there are problems to address before the benefit can blanket all Americans.