US Jobless Down But Static Wages Preventing Widespread SpendingMay 10, 18
With an official unemployment rate a shade under 4%, one might expect the American consumer to be feeling comfortable about spending more of his hard-earned cash. They should also feel that they are benefiting from the strength of the US economy.
While diamantaires – including not a few with whom I spoke at the Carat+ show in Antwerp this week – say the US market is solid generally and strong in pockets, none of them said it was storming ahead. According to a new poll I saw, just 12% of Americans said that they feel they are enjoying the benefits of the economy, while another 32% said they had received some benefit from the economy, according to the Monmouth University Polling Institute. Most, however, said that their families are still struggling.
As 57% of respondents mentioned, they believe that the wealthiest families had benefitted a lot from President Trump’s policies, with just 12% saying that poor families had benefitted a lot, and a meager 14% said middle class families were benefitting significantly.
Despite a tight jobs market, wages are not rising significantly – indeed not even keeping pace with inflation in many cases – and therefore many households are continuously battling with rising costs. Not only that, but the Federal Reserve is committed to raising key interest rates in a bid to counter inflation, and that's bad news for households paying loans and mortgages, as well as small medium-sized businesses wanting to take loans to expand their operations.
The upshot is that many consumers simply do not feel that they have the disposable cash to splash on jewelry. As the poll points out, most Americans do not believe that Trump has fulfilled his campaign promise to strengthen the middle class, and many believe that his economic policies are aimed at making the rich even wealthier.
A decade long period of stagnation takes a long time to turn around. The 4% jobs figure is likely off the mark, since there are many who have long since given up looking for work and thus not included in the figures. The American economy is enormous, but the spread of financial wealth is highly concentrated. That's not a purely American challenge – it affects most of the Western world.
Anyone who has travelled widely in the United States has seen the areas of extreme poverty that resemble Third World countries than the world's sole superpower. Travelled recently from Newark airport to Manhattan? For anyone who believes in the power and glory of the United States, read a book or have a nap, but don't look out the window.
The image of Americans over the 50 years before the 2008 financial crash as free-spending and high-tipping has taken a huge knock. The impact of the economic meltdown and the severe recession that followed appears to have created a huge population of savers. That's not necessarily a bad thing in terms of a prudent financial approach for households, but not for an economy so addicted to consumer spending.
The poll also found that Americans are less optimistic now than they were in January 2017 when Trump entered office that the government will help deal with the challenges they and their families faced, with a measly 26% believing that policy decisions out of Washington over the next few years will help them.