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Reich writes: "The last time consumers were this bummed out was October 2011, when there was widespread talk of a double-dip recession."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)



Why Consumers Are Bummed Out

By Robert Reich, Robert Reich's Blog

30 January 13

 

he Conference Board reported Tuesday that the preliminary January figure for consumer confidence in the United States fell to its lowest level in more than a year.

The last time consumers were this bummed out was October 2011, when there was widespread talk of a double-dip recession.

But this time business news is buoyant. The stock market is bullish. The housing market seems to have rebounded a bit.

So why are consumers so glum?

Because they're deeply worried about their jobs and their incomes - as they have every right to be.

The job situation is still lousy. We'll know more this coming Friday about what happened to jobs in January. But we know over 20 million people are still unemployed or underemployed.

Personal income is in terrible shape. The median wage continues to drop, adjusted for inflation.

Most people can't get readily-available loans because banks are still cautious about lending to anyone without a sterling credit history. (Eliminate student loans and you find Americans aren't borrowing any more than they were a year ago.)

And the payroll tax hike has reduced paychecks for the typical American by about $100 a month. That's just about what the typical family spends to fill up their gas tanks per month. Or half what they spend for groceries each week.

Contrast the current pessimism with consumer sentiment last October. Then, a majority polled by the Conference Board expected their incomes to rise over the next six months.

Now just 14 percent expect their incomes to rise, and 23 percent expect them to fall.

That 9 percent gap of pessimists exceeding optimists is the largest since the spring of 2009 when the Great Recession was almost at its worst.

The stock market is bullish because corporate profits are up, costs are down, the "fiscal cliff" agreement has locked in low taxes for most of the upper-middle class and wealthy, and there's no sign of inflation as far as the eye can see.

But corporate profits can't stay high when American consumers - whose spending is 70 percent of the U.S. economy - are this pessimistic about the future. They're just not going to spend.

American companies won't be able to make up the difference in foreign markets. Europe is careening into a recession. Japan is still in deep trouble. China's growth has slowed.

Profits are the highest share of the U.S. economy on record. Wages are the lowest. But this imbalance can't and won't last.

Investors: beware.

Politicians: Don't do any more deficit reduction. When consumers are this glum, austerity economics is particularly dangerous.

If the next showdowns over the fiscal cliff, government appropriations, and debt ceiling result in more deficit cuts this year, we're in a recession.

 

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+84 # jjj 2013-01-30 10:22
Well, duh. There has been no good news lately for the middle and lower classes. Y'know- those of us who buy "gas and groceries" and other goods and services locally as Mr Reich has pointed out many times before. Obama did not hold firm on his original fair taxes for the wealthy plan. Maybe I'm missing something here but for the rich to get even richer on the backs of the lower classes has NEVER brought financial health to a nation. Was there someone who thought this time would be an exception?
Thanks Mr Reich for keeping this topic in front of us.
 
 
+92 # Yakpsyche 2013-01-30 11:03
Where did you get the idea that the rich are interested in bringing financial health to the nation? Remember the Depression? What a fantastic opportunity for the rich! Buying up assets at pennies on the dollar with nary a regard for "the financial health of the nation". They didn't care about the nation then and don't care about it now. If the US becomes another third world country, it doesn't make any difference, just another cheap source of labor. This is not a very rational approach in the long run, but out of control greed has never been rational.
 
 
-70 # edge 2013-01-30 11:35
The OBAMA tax increase was the largest in decades and fell mainly on the working class!

Can't blame Bush for that one...OBAMA tax rates are HURTING WORKERS!!!
 
 
+28 # Todd Williams 2013-01-30 15:01
That is simply not true and you know it. Either that or you've been watching Fox all night and listening to Rush all day. This leads me to another random thought. I've noticed how Republicans always seem so darn depressed all the time. To them, it seems that everything is a bummer and most of it caused by Obama. I submit to you that about 50% of our country spends much of its free time glued to Fox News. That's enough to depress the Pope! So Edge, I suggest you turn on Comedy Central and watch Tosh.o, It's Aways Sunny in Philadelphia or some such nonsense and mellow out!
 
 
-10 # EPGAH3 2013-01-31 16:01
If you still have a job, take a look at your paycheck, Obama's new payroll taxes to fund his immense generosity will have left it a few hundred dollars "light".
Why should people not be depressed that Obama is punishing workers and rewarding shirkers?
 
 
+4 # DevinMacGregor 2013-02-02 09:08
Actually most of that is the end of the discount we were receiving for two years. Obama had us with a 2% temp lower payroll tax. Republicans in Congress let that expire. Payroll tax pays for SS.
 
 
+83 # wantrealdemocracy 2013-01-30 10:38
Consumers are more than 'bummed out'. We are broke, or as they say in Quebec square in the red. A red felt square pinned on your chest is a symbol of the anti Austerity movement in both Canada and the United States. The red square says NO CUTS and Tax the rich. There is plenty of money in this nation it is just all in the hands of the greedy few.
 
 
+24 # Fraenkel.1 2013-01-30 11:42
Quoting wantrealdemocracy:
Consumers are more than 'bummed out'. We are broke, or as they say in Quebec square in the red. A red felt square pinned on your chest is a symbol of the anti Austerity movement in both Canada and the United States. The red square says NO CUTS and Tax the rich. There is plenty of money in this nation it is just all in the hands of the greedy few.
* I agree. There's more to this. As money gets pooled among the resources of the undeserving wealthy, the banks and the big corporations and not enough of it is taxed to help support the poor and needy for food housing and medical care, the businesses they frequent for these services will lose resources. These are the very businesses controlled by the wealthy who refuse to pay taxes in the first place. This is a case of cutting off the nose to spite the face. I call it financial constipation. For money to flow round the economy you have to heavily tax the wealthy because otherwise it either isn't spent at all or is spent in the wrong way to do the system any good. One other thing - allot of consumption just isn't necessary, for example another fancier TV, car or computer.
 
 
+8 # DevinMacGregor 2013-01-30 22:23
What happens is we get an asset growth economy instead of a wage growth economy. Those same rich just take the money we are not being paid and buy assets with it like real estate and other businesses.

By buying up assets like real estate they jack that price up for the rest of us. By buying up businesses they deteriorate competition.

When you say fancier TV I see getting rid of an 2000 TV that weights a ton for one that I can pick up by myself. When you say car I see getting rid of a 1998 car that was breaking down all the time for a new one that gives me freedom to move around. When you say computer I see getting rid of a really old slow computer as in 7 years old for a faster one with a bigger monitor that I can see better without straining. Not to mention a new frig that is an energy saver that I watched my bill drop like a rock.
 
 
+7 # Michael Lee Bugg 2013-01-31 08:26
Devin, you and Yakpsyche have hit the nail on the head. The only rich people who suffered during the Great Depression were those who borrowed money to satisfy their insatiable greed to speculate in the stock market and then lost big when it collapsed. The rest, as Yakpsyche said, made out like robber barrons buying up land, homes, and businesses of those who lost their income. The same thing is happening now to some extent. The problem now is that Obama is not FDR or even LBJ, and most Democrats in Congress are beholden to the wealthiest business owners who make the majority of campaign contributions so there are very few Democrats and no Republicans in Congress to fight for the bottom 98% of Americans! With organized labor in deep decline, and too many school teachers and government workers drinking the Republican
Kool-aid (I've seen many government workers eager for tax cuts since 2001, and teachers who supported more religion in their schools, vouchers, and property tax cuts!) the Democrats are now dependent on the same plutocrats who keep the Republicans flush with campaign cash, and that means timid to token measures to restore a more equitable income distribution and weak gestures toward restoring a truly progressive tax code like we had until 1981 when Reagan started cutting rates to make life even easier on the top 2% and especially for the top 0.1% of Americans! When Reagan took office the top marginal tax rate was still 70% on all income over $400,000.00!
 
 
+8 # Vardoz 2013-01-30 16:08
Without a progressie Democracy all gains will go to the top and that's the way they like it.
 
 
+17 # MichaelArchAngel 2013-01-30 10:51
The way we distribute goods & services need to be revamped. Maybe a true depression is needed before we get the psychological oomph to do what is necessary.
 
 
+8 # joedeane 2013-01-30 10:53
Get it? Obam is the servant of the rich and especially of Wall St. He is the precise opposite of so called populism as are both the corporate political parties. Its a great economy for Wall St and a catastrophe for Main st, as is corporatsim for democracy. Like Mussolini he is champion of the rich and of empire, as well an authoritarian. The resemblances are legion.
 
 
+15 # Smokey 2013-01-30 11:44
Consumers know that the American economy is a house of cards. It may be colorful, and there are some kings and queens at the top who look fine, but the whole structure is shaky. If somebody shouts "Boo!" the tower may collapse.
 
 
+5 # amuller 2013-01-30 11:49
I see two pieces here, the first being peoples' lack of disposable income to spend. The second being the obvious incapacity of Obama and others to provide meaningful leadership. He's discouraging on many levels, and that has an impact, albeit one hard to measure.
 
 
+15 # flippancy 2013-01-30 14:05
Quoting amuller:
I see two pieces here, the first being peoples' lack of disposable income to spend. The second being the obvious incapacity of Obama and others to provide meaningful leadership. He's discouraging on many levels, and that has an impact, albeit one hard to measure.


It's not Obama's inability to provide meaningful leadership, it's solely the Republican intransigence and utter lack of concern for America outside of the scumbags who have bought them.
 
 
+3 # amuller 2013-01-30 19:13
For sure we'd be better off if the Dems had taken control of the House. But do you really think Obama wouldn't find other excuses.....? It's not the House that's forcing him to start wars, chip away at the Constitution, harass whistleblowers, appoint foxes to guard the henhouse, and on and on. I'm not meaning to demonize the guy, but he's weak when we need strong.
 
 
+2 # EPGAH3 2013-01-31 16:03
Wrong, Obama will pass Executive Orders to do the things he REALLY wants, and the rest, he just shrugs and blames the Republicans.
Why can't he do an Executive Order End Run around them on things that are important to ALL of us, not just what's important to HIM?
 
 
+31 # reiverpacific 2013-01-30 11:54
I just wish that this country's media would quit measuring growth by "Wall Street being Bullish" and even the housing market, as they are largely the territories of the wealthy is these times when banks are still holding on to leading funds and credit ratings have been wrecked, so the rich are selling their houses to other of their ilk and paying cash (my theory only).
I only know that where I live, shops, merchants, restaurants and other peripheral businesses like mine, have just had, across the board but with few exceptions, the worst "holiday" season since I opened up seven years ago and there is a lingering sense of stagnation and "wait and see" which looks like running well into the spring.
Let the Wall Streeters eat their own bullshit.
 
 
+36 # MendoChuck 2013-01-30 12:00
All I can say is the groceries that I used to get for $50 to $60 bucks a week are now costing me $150 to $180 a week.

Yet the actual money that I get my check each month has gone up only $35 dollars over the same period of time.

Yet the government statistics each month say inflation is well under control. Well I suppose it is if you are an elected, government official who is making up these statistics.

To bad they get to live in another world than the average, everyday person.
 
 
+35 # engelbach 2013-01-30 12:17
Personal enrichment is the sacred cow in the United States.

Despite all evidence to the contrary, people believe that they too can be wealthy, and they regard the 1% as being entitled to own most of the wealth in the nation.

"Confiscatory policies" are seen as detrimental to freedom, as if that word means the freedom to acquire most of the nation's resources regardless of the cost to society as a whole.

The United States needs redistribution in a big way. And regarding that word as verboten is accepting income inequality and the deterioration of the United States as the natural, just order of things.

I'm tired of "liberals" answering rightwing assertions that the rich deserve what they have with, "We're not objecting to people getting rich." I certainly do object to people getting "rich," when that wealth is unearned, coming as it does from the labor of others -- which is how almost all wealth is acquired.

A society that exists for the benefit and prosperity of all is a healthy one. The one-sided society in the United States is terminally ill. There's no compromise with a virus. The working class needs to take back from the plutocrats what rightfully belongs to the people.

Redistribution now. Labor Party 2016.
 
 
+7 # Vardoz 2013-01-30 15:45
Good luck- the congress and senate are run by a shadow gov and money rules our sould out reps. Unless we can get many more stronger people to run for office, I can't see any big changes coming. The Progressive caucaus is impotent. The whole system is rigged against uplifting the nation and giving more and more power to the corporate world that doesn't give a damn about us or the generations to follow. They are simply destructive, ravenous, capitalists who will do anything at any cost to anything.
 
 
+7 # Merschrod 2013-01-30 13:05
Wait, January is not a good time to ask consumers about buying more - they just came off the Christmas Binge. It is like asking overstuffed customers at a restaurant if they would like another main dish after they polished off the desert. The marginal greed is just not there.
 
 
+10 # independentmind 2013-01-30 19:07
Actually we will not be spending in January and did not spend over the holiday season either - my kids got no gifts. my husband has not had a raise in four years, this last time - after bragging how well the company did - the excuse is that they are afraid of the fiscal cliff!!!! In addition to that the dental benefits have been reduced by $500 a year and the deductible for the medical insurance went from $3,000, to $6,000 and this year to $8,000 a year. 17 years ago I was making $50,000 a year - now I make minimum wage - no benefits. Welcome to the new world.
 
 
+4 # bdeja 2013-01-30 13:39
Many consumers are bummed out simply because our elected Democratic Executive,Senat e and our "liberal Media" all continue to avoid much mention of the tube our Constitution is falling through as our personal rights are being trashed. Our President wants only to look forward except when he looks backward to go after whistleblowers and marijuana users. This becomes clear when we look at the sentencing of whistleblower John Kiriakou for disclosing a covert CIA agent even as we allow Dick Cheney to out agent Valerie Plame and things are conveniently leaked for the making of "Zero Dark Thirty". Why are we not protesting, as we did the first time torture-stained John Brennan's name was mentioned by President Obama four years ago, now that he once again is being promoted as head of the CIA?
 
 
-13 # thethinker 2013-01-30 13:56
With this dire situation facing American workers, why is the President pushing "comprehensive immigration reform"?

The immigration proposal will legalize 7 million workers and proposes an increase in both high skilled workers and low skilled workers.

This will hurt legal workers at all incomes, but especially those with less education, young workers,and minorities.

The President and many politicians pretend to care about workers, but then propose policies that hurt American workers, while benefiting illegal immigrants and employers who wish an endless supply of cheap labor.

The American people are on to their game and will rise up to defeat this ridiculous brand of "comprehensive immigration reform".
 
 
+4 # Vardoz 2013-01-30 14:51
Inflation has already set in. Our adjustable mortgage rate just went up a lot. Food is through the roof and so is heating oil and gas. Wages are low and we still have few jobs. Obama is trying to sooth us with seductive speeches while the big agenda is to have all the economic gains going to the top.
 
 
+5 # Allen 23 2013-01-30 18:14
Anyone else here get insulted when pundits and politicians refer to human beings as just "consumers?"
 
 
+8 # treadlightly 2013-01-30 19:39
Like it or not, the ones who set the standards for the rest of us, are the 1%, and they are predatory in nature. No news there. Greed is good right? No, greed kills.
People have been having this conversation forever. We forget sometimes that we are just very wise animals. So, changing the behavior of the alpha humans who control the money is going against every instinct in their being. They will die to protect what they instinctually believe is rightfully theirs.
That is the rub.
So, when you say "Consumer Confidence" the picture that comes to my mind is a large group of lesser humans, waiting to see what the alpha humans are going to do, before they can follow along, just as they have done forever.
There has got to be a better way.
 
 
+2 # Rick Levy 2013-01-30 22:35
As much as I enjoy Reich's posts, I still don't see what's so special about this particular time that there should be an increase in consumer angst. It's been a struggle for the Average American for the past fiver years or so anyway. So what else is new?

The only thing that I can see that may have brought on this gloom is, as Reich mentions, the return of the social security tax to its previous level which could indeed take a bite out of workers' paychecks, but everyone should have known the rate reduction was temporary anyway.

Otherwise it's been business as usual, which is for the top 1% to screw the other 99%. That isn't about to change.
 
 
+4 # Walter J Smith 2013-01-31 04:38
Robert Reich can be astonishingly clear and crisp when he is on target. The last sentences in this article are so on target, it is difficult to believe he actually brought himself to say it.

Then there is this hogwash: "The job situation is still lousy. We'll know more this coming Friday about what happened to jobs in January. But we know over 20 million people are still unemployed or underemployed." WHOA!

Yes, the job situation is lousy. It has been lousy over five years now.

And just what will "this Friday" tell us "about what happened to jobs in January"? We will only know what the bureaucrats say, and what they say is historically and increasingly subject to dramatic revision. For good reason. It is often simply wrong. Besides that, raw numbers do not tell us who stole the economy. Economists might tell us that if they wanted to. When was the last time we read or heard of one who even cared enough to say, "well, it looks like Jamie Dimon at JPM wiped out 30 thousand jobs over the last quarter, and Warren Buffett wiped out another 23,000" and so on?

Exceedingly few economists even care to think this pointedly. Why? because they are, like the bosses they choose, too polite by more than half to all the wrong people.

If none of the outrages committed upon the global & national economies over the last decade are illegal, why is that not because these CEOs own their judges & their regulators? Is this not treason?
 
 
+5 # USA2012??? 2013-01-31 06:30
Yes, the economical picture doesn't look too bright, but please let's not forget the many products we consumers purchase that simply no longer measure up for our hard earned cash. I think the companies that bailed on good American workmanship for cheaper labor have done America a grave disservice. I'm am now petrified to purchase anything made or assembled in China due to the substantial lack of quality control of the products being marketed here in America. I didn't realize until recently just how many products have been imported from China, and I'm sorry they simply don't measure up!

You CEO's and supposedly company stockholders need to do an about face by taking lower salaries, profits, channel the difference back to the workers and companies on this soil, and establish what was once a desirable and reliable product line such as many of the products made or assembled here in America used to be. Certainly products of this day and age are inferior to what we consumers used to purchase!
 
 
+3 # Joe6pK 2013-01-31 20:49
Robert Reich is always right about the right. The problem is the only people that pay for these unprofessional ceo bailouts are the persons lowest on the food chain! The market place and commercial world has no meaning to a homeless veteran or small children starving to death in the richest country in the world. The corporations are not americans, so why should they care? What's more important why should they be allowed to solicit our elected officials behind closed doors or in bars, bribing them with money to cross their constituents? That situation needs to be ended, of course their going to take the money, then give it right back to basically the same people with profit. Corporations, religions and criminals on Wall and the Banks are not worthy to have a seat at any decision in our government circles on what this country has to do for it's bosses, so lets get a "Lets Run Them all Out of Town" petition!
 

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