Americans’ insecurities grow as ecomony worsens
Without credit, consumers are left with paychecks that aren’t enough.
ASSOCIATED PRESS
Even when experts were declaring the economy healthy, many Americans voiced a vague, but persistent dissatisfaction.
True, jobs were relatively plentiful over the last few years. It was easy to borrow and very cheap. The sharp rise in the value of homes and plentiful credit cards encouraged a nation of consumers to get out and buy. But to many people, something didn’t feel right, even if they couldn’t quite explain why.
Now the economic tide is receding, and the undertow that was there all along is getting stronger.
Take away the easy credit, and consumers are left with paychecks that, for most, haven’t nearly kept pace with their need and propensity to spend.
The frustration of $3 gas and $4 milk, the worries about health care costs that have risen four times the rate of pay, become much more real. The retirement security that is only as good as the increasingly volatile stock market seems much less certain.
Americans’ declining confidence in their economy is triggered by a storm of very recent pressures, including plunging home prices, tightening credit and heavy debt. But it is compounded by anxiety that was there all along, the result of a long, slow drip of worries and vulnerabilities.
“The economy is currently in recession or arguably close to recession and that’s certainly weighing on the collective psyche,” says Mark Zandi, chief economist of forecaster Moody’s Economy.com. “But ... I do think there is an increasing level of angst that is more fundamental and is not going to go away even when the economy improves.”
Much of that anxiety is the uncomfortable, but expected jolt of the economic roller coaster. During a downturn, people become less confident about keeping their jobs or being able to find new ones, meeting household expenses and about the prospects for the future.
But there may be more to it than just cyclical ups and downs.
What does the economic future hold? Many Americans feel increasingly unable to answer that question with assurance, and they appraise it with a sense that they are less in control of the outcome.
In Westminster, Colo., George Apodaca hears that uncertainty from those enrolled in the home budgeting class he teaches. Most have steady jobs, but are just getting by. They talk about challenges such as the rising cost of getting to work or medical bills.
“People in my class, they don’t know what a recession means or what a boom means,” says Apodaca, a counselor for Colorado Housing Enterprises. “They’re worried about buying groceries, buying gas.”
Those uncertainties have been submerged for the past few years. The war in Iraq and the threat of terrorism dominated, drawing attention away from day-to-day economic concerns. With employers adding workers, people’s appraisal of the economy focused less on jobs, the long-standing measure of financial security.
Many people gauged their well-being in wealth — looking at the stock market, and much more broadly, the rise of real estate prices, said Susan Sterne, president of Economic Analysis Associates.
Americans borrowed freely against the value of their homes. But now there is nothing left to shield them from the insecurities rooted in the old measures of economic prosperity.
Except for the late 1990s, pay has been stagnant for more than a generation, barely keeping pace with inflation. In 1973, the median male worker earned $16.88 an hour, adjusted for inflation. In 2007, he earned $16.85.
For many families, the stagnation has been moderated by the addition of a second paycheck as more women went to work, and their pay rose over the same period.
Rennie Sawade, the son of a Michigan auto worker, majored in computer science because he saw no future on the assembly line. He was rewarded with a job at Oracle Corp., but lost it in late 2005 when the company shifted his department’s work to India. Sawade, who lives in Woodinville, Wash., near Seattle, has been unable to find a full-time replacement, instead jumping from contract job to contract job.
The contractor offers a 401(k), but contributions are entirely up to workers. When Sawade’s wife was diagnosed with thyroid cancer last year he missed the equivalent of two weeks’ work — and pay — for care of her. The job has health insurance but still left the family with a bill for more than $2,000. Contractors call to offer other jobs, but the pay is frequently disappointing, he says.
“It was pretty well known when I was working on my bachelor’s degree that the auto industry was going to move overseas,” he says. “Everybody said get into technology because you’ll have a career. Now it looks like the same thing is happening to technology.”