Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
20 Days Left to Find Buying Opportunities In Gold - 25th Mar 19
Will the Historic Imbalance in Gold Stocks to Gold Price Resolve ? - 25th Mar 19
EasySMX Wireless Games Controllers Review - 25th Mar 19
Stock Market Short-term Top - 25th Mar 19
UK Population Growth - Latest ONS Immigration Statistics and Consequences - 24th Mar 19
The Fed Follows Trump's Tweets, And Does The Right Thing - 24th Mar 19
Yield Curves, 2yr Yield, SPX Stocks and a Crack Up Boom? - 24th Mar 19
Risk/Reward in Silver Favors Buying Now, Not Waiting for Big Moves - 23rd Mar 19
Similarities Between Stock Market Today and Previous Bull Market Tops - 23rd Mar 19
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

10 Things That Affect Your Purchasing Power

Economics / Inflation Sep 24, 2014 - 06:32 PM GMT

By: Harry_Dent

Economics

Rodney Johnson writes: This might be considered “wonkish,” but it tells the story of how middle-class purchasing power has suffered since 2007.

Recently, the Federal Reserve released the 2013 Survey of Consumer Finances (SCF). This tri-annual survey is a treasure trove of information that provides a snapshot into the financial life of the median American in inflation-adjusted 2013 dollars. Notice that I said “median” and not “average”… that’s important.


The average can be skewed by a few people at the top or bottom of any measurement. The median gives us the point at which half the people are above and half the people are below and is a much better indicator of what’s going on. Because the SCF has been conducted for decades, we can see how people have progressed, or regressed, over time.

The changes over the last six years are consistently horrible, particularly for those in the middle income brackets.

10 Factors That Affect Your Purchasing Power

  • Age of Head of Household
  • Percentile of Income
  • Family Structure
  • Education of Head of Household
  • Race of Head of Household
  • Current Work Status of Respondent
  • Region
  • Urbanicity
  • Housing Status
  • Percentile of Net Worth

Since 2007, median net worth has tanked, almost any way you cut it. The one group that escaped a decline was the Current Work Status of “other,” whose median net worth in 2007 was $6,000, and in 2013 was $9,000. Yes, I know… fat cats on Wall Street and corporate executives are raking in ridiculous sums of money, so there must be small pockets of people that have seen their fortunes rise over the past six years. These groups are so small that they exist at the edges of society.

For the median person, the one in the exact middle in all of these categories except the one, it’s nothing but losses. Looking at just one classification — net worth by percentile of income — the change in median net worth from 2007 to 2013 is breathtaking.

When we flip over to the change in median income itself, the results are still miserable, though not as dramatic. Almost every group in every category suffered a decline in income over the past six years. The exceptions were households led by those over 65 years old, households of retirees, and those with net worth in the 90% to 100% range. Again, breaking it out by percentile of income, there were losses in every group.

While the median at the bottom and the top of the food chain experienced little change in inflation-adjusted earnings over the past six years, those in the middle income and just below were hit hard.

Now, think of these two statistics together. For those who earn between the 40th and 59.9th percentile of earnings, meaning those smack in the middle of wages in the U.S., purchasing power has fallen by 12% while their net worth has plummeted by 38%… and that’s over SIX YEARS!

This isn’t a one-year aberration, or some fluke in the data. This is six years.

Where is the recovery? Where is the improving economy that is supposed to carry the U.S. through the second half of the 2010s? How are people supposed to not only grow their purchasing power, but also put money away for their future?

Keep in mind that the inflation numbers used to adjust the data are the official Consumer Price Index (CPI) figures. If we used more realistic numbers over those same six years, showing higher spending on medical expenses, education and food, the reports would be even worse.

Whenever you read about the recovery gaining speed, or about consumers gearing up for higher spending, think about these numbers. Think about the millions of Americans who can’t even tread water financially, and have watched their situation deteriorate for more than five years. These are not high school dropouts, or even just high school graduates (only 35% of Americans have a college degree, so by definition 50% of earners must include many college grads).

Think about them when someone at the Fed, in Congress, in the Administration or at the New York Times crows about how they “saved” us.

The line between the “haves” and the “have-nots” is being drawn more boldly with each passing year. At some point, the angry “have-nots” might choose to stand up and start saving themselves. This should make the small group at the top very nervous.

Rodney

http://economyandmarkets.com

Follow me on Twitter @RJHSDent

Rodney Johnson

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules