This Week, Consumers Lacked the Urgency to Shop
Now, the average American family not only makes less than it did before the recession, but it makes less than it did in 1989, according the Department of Commerce’s Census Bureau, in 1989, the median American household made $51,681 annually in current dollars, while in 2012, annual household earnings amounted to an average of $51,017. This lost generation of economic gains has kept middle-income and lower-income individuals and households from saving for retirement and saving for college.
Even worse for the economy is that stagnating incomes mean Americans are more likely to keep discretionary spending to their immediate needs. Consumer spending accounts for approximately 70 percent of gross domestic product and because government and business spending have remained weak, the economy is depending even more on household spending to fuel growth. ”It’s hard to get to a significant pickup in growth without the consumer playing a significant role in that,” Jim Baird, chief investment officer at Plante Moran Financial Advisors, told The Wall Street Journal earlier this month.
With consumer confidence ebbing and the slow pace of retail sales growth, consumer spending is clearing not providing the necessary momentum for a stronger recovery. “We have to see better job growth, better income growth” for consumer spending to improve, Wells Fargo Securities analyst Eugenio Aleman said following the Department of Commerce’s August retail sales report.