The Middle Class In The U.S. Economy Is On The Verge of Collapse
Michael Lombardi: It’s the elephant in the room no one wants to talk about…
The middle class in the U.S. economy is on the verge of collapse. Yes, I said collapse. That social class that once helped the U.S. economy grow and prosper is coming apart. Will the U.S. economy ever be the same without it or is this the new norm?
Here’s why it’s important to you.
The middle class helped the U.S. economy (following World War II and up until the credit crisis of 2008) by buying goods and services (NYSEARCA:XLY) they needed or wanted. They bought cars, TV sets, furniture, appliances, clothing, computers, and flashy gadgets. In simple terms: they spent money.
The spending by the middle class resulted in American companies selling more, making more, and hiring more people to meet consumer demand. Businesses then took their profits and invested in new projects and built more factories. This is how cities like Detroit flourished.
But where does the middle class of the U.S. economy stand now?
Signs of trouble for the middle class of the U.S. economy actually started to surface at the start of the new century, but it wasn’t until the financial crisis when the middle class in the U.S. economy really started to deteriorate.
Today, the middle class is not buying or spending like it once did—and this is not by choice.
The collapse of the housing market in the U.S. economy has taken a devastating toll on the middle class in this country.
While the media and politicians keep telling us the housing market has turned the corner and is healthy again, the delinquency rate on single-family residential mortgages at all commercial banks in the second quarter of this year stood at 9.41%—that’s 558% higher than the delinquency rate in the first quarter of 2005. (Source: Federal Reserve Bank of St. Louis web site, last accessed September 4, 2013.)
If there was such a survey, my bet is it would show middle managers in the U.S. economy are making considerably less today than they did before the financial crisis. And retail sales in the U.S. economy show this. The middle class is moving from mid-tier retail stores like Macy’s, Inc. (NYSE:M) to low-end retailers like the Dollar General Corporation (NYSE:DG).
When presenting his company’s second-quarter earnings, the chairman and CEO of Dollar General, Richard Dreiling, said, “Dollar General delivered another solid quarter. Our same-store sales growth for the second quarter of 2013 accelerated to 5.1%. We are very pleased with the increase in customer traffic in our stores. We continue to grow our market share and believe that our second quarter results position us well to deliver our financial outlook for the year.” (Source: “Dollar General Corporation Reports Record Second Quarter 2013 Financial Results,” Dollar General Corporation web site, September 4, 2013.)
Unlike Dollar General, the executives from Macy’s complained about slower sales in the U.S. economy. (Mind you, Macy’s isn’t the only middle-of-the-road retailer complaining about customer demand.)
This is all happening because the middle class in the U.S. economy is actually earning less, which is something the politicians are not talking about.