PHILADELPHIA • Almost everywhere, the US economy is booming. But a look behind the headlines of employment growth and consumer spending reveals that the economic boom continues largely by the poor half of Americans who are saving their debts and accumulating debt.
The percentage of people with income is responsible for most of the spending in the last two years even though their financial situation has deteriorated – a break with an old trend of many decades where the richest 40% had mainly fueled growth in consumption. the costs rise, the resumption of inflation and the effects of President Donald Trump 's tax cuts, a negative shock – a further rise in gasoline prices or an increase in the cost of goods due at tariffs – could push the most vulnerable "
This could in turn threaten the second-longest expansion of the United States, since consumption accounts for 70% of the output of the US economy.
away from the dangerous lever reached in 2007 before the accident. Unemployment is at its lowest since 2000 and as employment opportunities reach record highs, people may also choose to work even more hours or take additional jobs rather than reduce their expenses if the Money is tightening.
They say they are financially well off, according to the US Federal Reserve's report on the economic well-being of US households released in May and based on a survey of 2017.
And yet , by filtering data on household finances and wages reveals increasing financial stress among low-income households even as their contribution to consumption and growth of the economy in general increases
Interactive: lower half of employees borrows more, saves savings
Data show that median spending growth exceeded pre-tax income for the bottom 40% of employees in the five years to mid-2017 while that the top half has increased its financial base, accentuating income disparities.
A job market and other signs of economic health are encouraging the rich and the poor to spend more, but the tepid growth in wages of many middle-clbad and low-income Americans means that they must As a result, over the past year, signs of financial fragility have increased, with credit card and auto loan defaults on the rise and plumbing savings at their lowest since 2005. [19659004] Myna Whitney, 27, a certified medical badistant at the Gastroenterology Unit at Drexel University in Philadelphia, has experienced it first-hand.
Three years ago, confident that a full-time job provided her with enough financial security and a $ 119,000 home, where she lives with her mother and aunt.
Since then, she has learned that earning $ 16.47 by the hour – more than 40% of American workers – was not enough.
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Myna Whitney, Certified Medical Assistant at the Gastroenterology Unit Drexel Medicine, poses in front of her home in Philadelphia, Pennsylvania ” clbad=”img-responsive lazyload full” width=”640″ height=”426″ data-sizes=”auto” data-srcset=”https://bloximages.newyork1.vip.townnews.com/stltoday.com/content/tncms/badets/v3/editorial/b/9c/b9c62e72-bb0c-5b31-bad8-3a91bfda0fc6/5b5685cb9df11.image.jpg?resize=200%2C133 200w, https://bloximages.newyork1.vip.townnews.com/stltoday.com/content/tncms/badets/v3/editorial/b/9c/b9c62e72-bb0c-5b31-bad8-3a91bfda0fc6/5b5685cb9df11.image.jpg?resize=300%2C200 300w, https://bloximages.newyork1.vip.townnews.com/stltoday.com/content/tncms/badets/v3/editorial/b/9c/b9c62e72-bb0c-5b31-bad8-3a91bfda0fc6/5b5685cb9df11.image.jpg?resize=400%2C266 400w, https://bloximages.newyork1.vip.townnews.com/stltoday.com/content/tncms/badets/v3/editorial/b/9c/b9c62e72-bb0c-5b31-bad8-3a91bfda0fc6/5b5685cb9df11.image.jpg?resize=540%2C359 540w, https://bloximages.newyork1.vip.townnews.com/stltoday.com/content/tncms/badets/v3/editorial/b/9c/b9c62e72-bb0c-5b31-bad8-3a91bfda0fc6/5b5685cb9df11.image.jpg 750w”/>
his house in Philadelphia on June 27, 2018. Photo taken June 27, 2018. REUTERS / Jonathan Spicer
JONATHAN SPICER
"I dipped every month in my savings account to make all the payments," says Whitney. Now that her savings are going from $ 10,000 to $ 900, she is cutting her budget on toilet paper and electricity. Cable TV and Groupon's $ 5 occasional movie releases are her indulgences, she says, but she mocks the question of whether she dines or not …
"May God have me gives a ticket, or something breaks, Stephen Gallagher, an economist at Societe Generale, says the tense finances of those in the middle have softened the otherwise positive outlook of the economy.
"They're taking out a debt that they can not pay back. "A drop in savings and a rise in defaults mean that you can not support (global) spending," he said. commercial could lead to "a fairly dramatic reduction in consumption," he added.
Some economists say that without the $ 1.5 trillion in tax cuts enacted in January, spending has gone up. about 3% per year In the past, the hau While the top 40% of employees' incomes have been the driving force behind most of the growth in consumption, since 2016 consumer spending has been driven mainly by a drop in consumption. According to Oxford Economics, this partly represents better access to credit for low-income borrowers at the end of the business cycle.
Yet, it's the first time in two decades "It's usually very difficult for people to cut back on their expenses or to adopt a certain lifestyle, especially when the economic context is really positive. "said Greg Ory Daco, chief US economist of Oxford." It's essentially a weak core that makes the back of the economy a little more sensitive to tension and potentially to breakup. "[19659022] Jobs not raises
While the Fed expects the labor market to become even hotter this year With inflation taken into account, average hourly wages have fallen by a factor of 1.50%. a penny in May compared to a year ago for 80 percent of the country's private sector workers, including those in the vast health care, fast food and manufacturing industries, show the Bureau figures of Labor Statistics.
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A customer counts his money at the checkout of a Walmart store in the Porter Ranch section of Los Angeles on November 26, 2013. REUTERS / Kevork Djansezian / Photo File
KEVORK DJANSEZIAN
"It stinks," says Jennifer Delauder, 44, who runs a medical laboratory at the Huttonsville Correctional Center in West Virginia. In seven years, his hourly wage has increased from about 2 to 14 dollars.
She took two part-time jobs to help pay rent, utilities, and a student loan. But she is still struggling to make ends meet, even going as far as badembling broken fans, spare parts and lanterns to sell them as junk. A $ 2,000 hospital bill at the beginning of the year has erased its savings.
Nevertheless, Delauder, a grandmother, recently signed papers for a mortgage of up to $ 150,000 on a house. "I pay the rent of a house, and I could pay for a house I own," she said.
The hourly wages of low- and middle-income workers increased by more than 2% up to March 2017 This represents both higher costs such as rent, prescription drugs and tuition, but also an increase in discretionary spending, for example [19659004AccordingtoeconomistsoneofthesymptomsofthefinancialcrisiswasthesharpriseinUScreditcardarrearslastyearwhichmanypoorhouseholdsuseasatemporarymeasureThe$815billionmarketisnotbigenoughtoshakeWallStreetbutcouldbeanearlysignofstressthatcouldspreadtootherdebtsastheFedcontinuesitsgradualtighteningofpolicies[19659004]which allowed non-mortgage household debt to reach record levels in the first quarter of this year.
While sketching an overall positive picture, the Fed's welfare survey also revealed that one in four adults feared they could not afford a $ 400 emergency. and one in five struggled with monthly bills. This month, the central bank reported to Congress that rising deficits of the riskiest borrowers were "pockets of stress".
The lack of financial security of the Americans remains worrying, said the president of the Fed in New York last month. "Even though the overall situation is pretty good, solid or strong," he said, "it's a problem that continues to hover over half of our country."
Additional reportage by Ann Saphir in San Francisco and Howard Schneider in Washington, DC
