Reports from the Economic Front

a blog by Marty Hart-Landsberg

US Households Experience Growing Insecurity

People are angry about economic trends and are searching, as voting trends reveal, for ways to communicate their strong desire for change. A recent Pew Charitable Trusts issue brief on Household Expenditure and Income provides powerful insight into those trends.

The issue brief focuses on households in which survey respondents or their spouses are between the ages of 20 and 60.  The households are then divided into thirds based on income.  The key takeaway is the growing economic insecurity of US households.

Figure 1 shows that it took until 2014 for inflation-adjusted median and mean household expenditures to return to their pre-recession levels.

Fig_1_Expen

However, as Figure 2 shows, the median rise in household expenditure was not matched by a corresponding increase in median pre-tax household income.

Fig_2_Expen

As the authors of the issue brief explain:

By 2014, median income had fallen by 13 percent from 2004 levels, while expenditures had increased by nearly 14 percent. This change in the expenditure-to-income ratio in the years following the financial crisis is a clear indication of why and how households feel financially strained.

Figure 4 highlights the recent upswing in costs of housing, food and transportation.

Fig_4_Expen

The housing squeeze has become especially severe for low income renters.  As Figure 6 shows, in 2014, low income renter households spent almost half of their pre-tax income on housing.

Fig_6_Expen

More generally, as Figure 10 reveals, households in all three income groups are experiencing budget tightening; they have significantly less money left over after meeting their regular annual expenditures than they did in 2004.

Fig_10_ExpenIn the words of the study:

The amount of slack that families had in their budgets declined for all income groups between 2004 and 2014. . . . In 2004, the typical household in the lower third had a little less than $1,500 left over after accounting for annual outlays. Just 10 years later, this amount had fallen to negative $2,300, a $3,800 decline. These households may have had to use savings, get help from family and friends, or use credit to meet regular annual household expenditures. The typical household in the middle third saw its slack drop from $17,000 in 2004 to $6,000 in 2014. Of note, because income is measured before taxes, some families will have had even less slack in their budgets than this figure implies.

Sadly, there is no reason to believe that majority economic prospects will take a turn for the better.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: