Originally published November 6 2012
Americans are wiping out their savings more than ever before despite the plummeting economy
by J. D. Heyes
(NaturalNews) You've likely heard the U.S. economy is in a major slump. More than three years after the Great Recession was officially declared over in 2009, the vast majority of ordinary Americans are still suffering under the crushing weight of a bad economy.
Gross Domestic Product, at slightly more than $15 trillion annually, is far below normal for the world's largest economy. Worse, growth remains stagnant; the U.S. economy grew by two percent in the third quarter, but for the year, it will likely be a paltry 1.74 percent below last year's meager 1.8 percent.
"Since the recovery from the Great Recession began in June 2009, the U.S. economy has grown at the slowest rate of any recovery in the post-World War II period," CBS MoneyWatch reported.
Eating up savings accounts just to survive
Slow economic growth means slow employment growth. The employment rate, which rose again last month, to 7.9, is far higher than the four percent rate needed to substantially reduce joblessness. The economy only created 171,000 jobs in October - more than analysts had forecast, but way below the numbers needed to substantially lower unemployment (and raise tax revenues).
Slow economic growth also means stagnant wage growth. In fact, say analysts, wages have grown at their slowest pace since the 1960s, and there is little indication that wages will begin to rise substantially anytime soon.
What does all this mean to the average American family? It means we are growing poorer; we may be spending as much or more, which would account for a smidgen of economic growth, but we are doing so at the expense of our savings accounts.
"Americans increased their spending in September at twice the rate that their income grew, a sign of confidence in the economy. Still, consumers made up the difference by saving less for a third straight month, a troubling trend," The Associated Press reported recently.
Consumer spending makes up about 70 percent of annual GDP, but with stagnant wage growth and weak employment - throw in a little inflation for good measure (especially food and energy costs), and you can see why our personal wealth continues to decline.
"Personal income rose 0.4 percent, an improvement from a slight 0.1 percent gain in August and the best gain since March. However, after adjusting for inflation and taxes, income was flat in September. That followed a 0.3 percent decline in August," the AP reported.
Note the writers at Zero Hedge, "Today's personal income and spending report [as measured by the Commerce Department's Bureau of Economic Analysis] for the month of September was just the latest datapoint confirming that the US consumer is once again massively cash-strapped and is eating, literally, into their savings."
Talk of a 'recovery?'
The personal savings rate fell from 3.7 percent in August to 3.3 percent in September, the lowest they've been in 2012.
"This was the lowest Savings point in 2012, and higher only compared to last November's 3.2 percent, which in turn was the lowest point since the start of the second great depression," the Zero Hedge report said.
And yet, Americans are being told that the nation has been in an "economic recovery" since June 2009? If this is what a recovery looks like, who needs another recession?
"Overeager consumers saw their nominal incomes increase... and decided to outspend said rise at double the rate of increase! At this pace, by the time Thanksgiving rolls out, U.S. consumers will have no savings at all left to tap and living will be strictly a month to month activity," says the report.
As pointed out earlier, real wages are stagnant and, in a number of instances, declining. The report notes that real incomes, on average, fell for the second straight month in September.
"In other words, even real incomes are now consistently declining, spending aside," said Zero Hedge.
All of this means that the American consumer is very literally tapped out, or has little economic cushion left. Overall, the economy is "looking at a holiday season where spending is expected to ramp up drastically with empty bank accounts and maxed out credit cards," the report concludes.
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