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UPDATED: as of June 11 9:00 am
Retail sales tumbled 1.2% in May, as a new poll indicates that the spending is primarily coming from wealthier and older consumers.
The government released its report on retail sales for May on Friday, and the Commerce Department said sales dropped from the previous month bucking expectations for a small increase. Declines were pretty broad based among autos, gas stations and general merchandise stores. Grocery and health-care stores posted increases, and there was some strength in companies that sell furniture and appliances, possibly boosted by government tax credits.
A new poll from Gallup may indicate that the mix of spending may have a hard time keeping retail sales buoyant. The poll indicates that consumers who make more than $90,000 account for the bulk of that spending increase. Upper-income Americans’ self-reported spending rose 33% to an average of $145 per day in May — up from $109 per day in April. Meanwhile, middle- and lower-income Americans’ self-reported spending averaged $59 per day in May, unchanged from the previous month.
Higher-income “consumers seemed to be holding back on spending prior to May in response to the length and depth of the recession, the financial crisis, and a general feeling of economic uncertainty,” wrote Dennis Jacobe, Gallup chief economist. “In May, this seemed to change. It could be that many upper-income consumers are experiencing ‘frugality fatigue.’”
The result is consistent with the picture in the U.S. labor market. In May, the headline U.S. unemployment rate declined to 9.7% from 9.9%, but all of the gains came from workers with a bachelor’s degree or higher, which tend to include the highest paid workers. The jobless rate among college graduates dropped to 4.7% from 4.9% as the number of unemployed declined, compared to an increase among all other education levels. The unemployment rate jumped to 15% for those with less than a high school diploma and climbed to 10.9% for high school graduates.
The increased spending by higher-income consumers also was reflected in monthly reports from companies. Luxury retailers posted some of the best numbers last week in same-store sales.
Meanwhile, when you break Gallup’s spending data down by age, all groups increased their spending from last year, a positive sign for economic recovery. But the biggest jump — 45% — came from consumers over 65 years of age. Though down over the last month, the U.S. stock market rallied through most of the last 12 months, possibly boosting sentiment among retirees and those nearing retirement.
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“Create a strong immigration policy.”
If that means making it easier to needed workers who will do jobs American won’t or can’t to come in legally, I’m all for it. If it means xenophobia, it won’t work. First, we have always been a nation which welcomed immigrants to build our wealth. Second, since we refused to have children at replacements, much less above them, like the Greatest Generation did, we need immigrants to fill the void. Excluding immigrants will only compound the error we made in not having more children of our own.
To WSW
Low interest rates are good, but to “keep” them where they are is crazy, mortgage rates are way too low and in general the government has manipulated the credit markets so their relationship to risk is largely being lost.
WTF is with people always reference to people of the past or founding fathers..blah blah blah. These people are insignificant now, for starters they are dead, but this is our society and our world and it’s much much different then theirs. Grow up and get back to reality. And Time to Wake up…I don’t mean to slap you around because of your post, because I appluad your “get back to the center” view which I’m 100% behind. Extreme views and posts sure make for some fun reading, if you want to look at it optomistically.
If only we had cut spending to keep up with our tax cuts, this all might have worked . . . but we didn’t. Not only did we eat OUR seed corn, which is foolish, we ate our children’s and grandchildren’s future earnings, which is immoral.
But I agree, we don’t need to return to the tax rates of the 1950s. Clinton run surpluses and inequality decreased with the rates we will return to if Congress does nothing by the end of this year. That’s a start.
But have you ever considered that the reason the rest of the world caught up is because we let them. They worked while we partied; they saved while we borrowed. We entered trade agreements that favored them and disfavored ourselves. They didn’t catch up just by happenstance. We played the hare to their tortoise and caught us. And most of the “Rich” folks here appear to think we should continue to do so. Why it work any better going forward than it has so far is beyond my understanding, but I guess as long as it works for the “rich” everyone else, including our descendants, be damned.
The FED always tells Congress to reduce spending. NEW TACTIC: When the Fed is ready to raise interest rates a quarter point, for instance, they give Congress thirty days to enact an equivalent amount of spending cuts (predetermined by their economists). That way, the economy can cool off by reducing government, and business can continue to grow (growing the tax base for both state and federal revenues). If Congress fails to act in the thirty days, the FED enacts the rate hike. After a few passes of Congressional inaction, there would be a public uproar and demand for spending reduction, starting with TARP funds and Stimulus funds still on the table. Those would get pulled back first. I hope this gets good debate, because it would reduce the deficit by both reducing spending and growing the tax base at the same time.
A simple remedy for economy success: Firstly, substantially reduce taxes. Implement a flat tax. Eliminate wasteful entitlements. Revamp social security. Reduce spending. Reduce the debt/deficit. Create smaller government. Promote small business. Elect conservative representatives. Keep interest rates low. Create a strong immigration policy. Maintain a strong Federal Reserve!
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