Wampum

Worker bees get squeezed, and it finally shows

A report on consumer spending released today indicates that the drop in average worker wages is now having an impact on consumer spending:

Consumer Spending Growth Slowed in May
Fri Jul 9, 2004 11:48 AM ET

NEW YORK (Reuters) - Growth in U.S. consumer spending slowed in May as lower real wages and house prices, combined with fading benefits from tax cuts, squeezed middle-class Americans, a report showed on Friday.
Deloitte Research said its Leading Index of Consumer Spending fell to 5.30 percent in May from 5.84 in April, as a polarization in incomes -- with gains concentrated at the high end of the wage spectrum -- prompted consumers to curtail shopping.

"Reduced housing-related sales and the decline in real wages will produce a slowdown in spending by middle-class households," said Carl Steidmann, chief economist at Deloitte.

"However, luxury goods retailers should expect better sales from higher income households due to a rise in profit growth and interest income."

Let's not forget the impact of higher gas and energy prices as well, as more of the weekly paycheck goes into the gas tank.

Just how bad is the decline in real wages? Here's an update from a series I began late last fall.

Ironically, personal incomes have consistently increased over the past year, but that appears to mainly be related to the 40% increase in the value of the stock market. If you're a lowly worker bee with no investments, the economic "recovery" appears to have left you behind.

Of course, if you complain, Republicans will merely label you a pessimist. Besides, eventually, all that extra income at the top will trickle down, as tips to former-manufacturing-employee-turned-waiter.

Posted by MB Williams at July 9, 2004 12:17 PM | TrackBack