Death Of The Consumer Economy: A Third Of U.S. Adults Now Struggle To Pay Basics
By Michael Snyder/Economic Collapse Blog September 10, 2024
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When U.S. consumers are doing well, the U.S. economy does well. But of course the opposite is also true. When U.S. consumers are not doing well, the U.S. economy really suffers. The government has been trying really hard to put a happy face on things, but the truth is that the standard of living for most U.S. consumers has been going down for a long time.
The cost of living has been rising faster than paychecks have, and so most of us have less discretionary income than we once did. And that is really bad news for the U.S. economy, because as the official White House website has pointed out, consumer spending typically accounts for about two-thirds of all economic activity...
Consumption spending makes up two-thirds of the U.S. economy on average, so as the U.S. consumer goes, so goes the U.S. economy.
For once, the White House has told us something that is actually accurate. In the first quarter of 2024, consumer spending accounted for 68 percent of GDP. It has been right around the two-thirds mark for many years, and that makes it one of the most stable numbers in economics.
Unfortunately, consumers are more financially stressed today than they have been in ages. In fact, a survey that was recently conducted by the U.S. Census Bureau discovered that 37 percent of U.S. adults now struggle to pay for their most basic expenses each month...
About 37% of American adults are in households that found it somewhat or very difficult to pay for typical expenses between late June and late July, according to the U.S. Census Bureau's Household Pulse Survey.
When you are barely able to pay for food, housing and other essentials, there is not going to be extra money to blow at retail stores and restaurants. This is one of the primary reasons why so many retailers and restaurant chains are going bankrupt in 2024.
Of course the economic pain is not spread equally across the entire country.
According to that same survey, consumers are particularly struggling in "poor" states such as Mississippi, Alabama and West Virginia...
Mississippi (49.5%), Alabama (45.5%) and West Virginia (43.5%) have the highest percentage of adults who say they're having trouble affording their basic needs.
I think that there are many good things that could be said about all three states.
In fact, I have Alabama ranked 11th for survivability out of all 50 states in my book about the great turmoil that will soon hit our society.
But if you don't have money, it can be really tough to live in an area of the country where employment prospects are relatively poor.
Needless to say, lots of people in big states are really hurting right now too.
The Census survey found that 41.8 percent of Florida residents, 40 percent of New York residents, 39.9 percent of Texas residents and 37.5 percent of California residents are having difficultly paying for their basic expenses at this point.
When close to 40 percent of the population is just barely scraping by, you have a major economic crisis on your hands.
No matter how they want to frame things, our leaders are not going to be able to ignore this forever.
The lack of consumer spending is hitting the restaurant industry particularly hard...
The year has not even reached its fourth quarter and bankruptcies among restaurant chains, operating companies and large franchisees are already nearly double what they were in 2023.
Jonathan Carson, co-CEO of bankruptcy services and technology firm Stretto, says there have been 17 such Chapter 11 filings in the sector so far in 2024, and there were only nine at this point last year. He expects the trend to continue.
According to Carson, a number of factors have contributed to the nightmare that the restaurant industry is now facing...
"In this situation, a challenging economic environment, post-pandemic recovery issues, rising labor costs, changing consumer habits and inflation have caused more restaurants to struggle in 2024," Carson told FOX Business in an interview, noting those issues have also impacted other sectors of the economy.
Retailers have also been going bankrupt at a staggering rate.
Just today, I came across another example. Earlier this year, LL Flooring shuttered close to 100 stores, but now the company has decided that it is time to permanently shut down all 442 stores...
LL Flooring - previously known as Lumber Liquidators - is shutting all its stores after going out of business after three decades.
The retailer, one of America's biggest flooring suppliers, was looking for a buyer after filing for bankruptcy.
Earlier in the summer it had 442 stores, but shut nearly 100 as it looked to cut costs and woo investors. No buyer could be found.
You can't get blood out of a stone.
If consumers had plenty of discretionary income, they would be out spending it.
But they don't, and things will only get worse during the months ahead.
Politicians can keep giving more speeches about "how well the economy is doing", but it won't change the cold, hard facts on the ground. If someone tries to tell you that the economy is in good shape, just point out that the number of business bankruptcies has been absolutely exploding...
According to statistics released by the Administrative Office of the U.S. Courts, annual bankruptcy filings totaled 486,613 in the year ending June 2024, compared with 418,724 cases in the previous year.
Business filings rose 40.3 percent, from 15,724 to 22,060 in the year ending June 30, 2024. Non-business bankruptcy filings rose 15.3 percent to 464,553, compared with 403,000 in the previous year.
The moment that you point this out, the argument will be over.
There is no way that anyone can monkey with that number.
Either businesses are filing for bankruptcy or they aren't.
Right now, companies all over America are really hurting, and as a result many of them are also laying off workers.
In fact, things are so bad that even the tech industry has been conducting mass layoffs...
Tech companies continued to cut jobs at a rapid pace in August 2024. More than 27,000 workers in the industry lost their jobs as over 40 companies, including big names like Intel, IBM, and Cisco, as well as numerous smaller startups, announced layoffs. To date, more than 136,000 tech workers have been laid off by 422 companies in 2024, indicating significant upheaval in the sector.
The momentum of our economy is clearly taking us in a very troubling direction.
Our standard of living has been in decline for years, and now our economic problems are accelerating.
Hopefully you have been making preparations for hard times, because a tremendous amount of pain is ahead.
Originally published at The Economic Collapse Blog
