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08/28/2012

Explaining America�s Weak & Sluggish Economy

A sluggish economic recovery sees some pundits suggesting the problem revolves around the notion that the richest Americans and companies don�t have enough money to invest or that �regulations� or �uncertainty� is discouraging investment.

No. According to recent data, the problem is that the primary customers in this economy, average American households, are losing ground fast. When a company�s customers are suffering, the company will suffer � no matter how much cash it has available to invest.

American consumers spend most of their money in at home. And that money becomes revenue for U.S. companies. So when the average consumer�s spending is weak, the whole economy is weak. Which is exactly the situation we�re in now.

A new study by Sentier Research provides the evidence. In the year 2000, after adjusting for inflation, the median household in the U.S. earned about $55,000 per year. Now, twelve years later, the median has fallen to $51,000.

The two age-groups that have been hit the worst during this period are households led by those in the 55-64 age group and those in the 25-34 age group. The incomes of the near-retirees have fallen by nearly 10% in just the past three years. Thus, the bottom-line is that the economic recovery is weak and sluggish because consumers are losing their spending power.



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