5 Ways Americans Are Surviving the Great Recession
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According to the survey of 1,000 middle-class households, more than half or respondents say they're cutting back on everyday expenses, four out of 10 say they're “using all of their extra income” to pay down debt and 15 percent are even taking second jobs or working extra shifts to dig themselves out of the hole.
As the shock of the financial crash took hold, these efforts looked like they were paying off. According to Federal Reserve Data, American households lopped 4 percent off of their consumer debts in 2009. They kept it up through the first three quarters of 2010 – paying down consumer debt to the tune of about 3 more percent. But with worker compensation falling since then, the pattern has reversed itself – from last fall until today, households are again running up the credit cards, taking out lines of credit and sinking deeper into the red. And this week, Bloomberg reported on the trend, which appears to be continuing apace:
The dollar volume of purchases charged grew 10.7 percent in June from a year ago, while the number of transactions rose 6.8 percent, according to First Data Corp.’s SpendTrend report issued this month. The difference probably represents the increasing cost of gasoline, said Silvio Tavares, senior vice president at First Data, the largest credit card processor.
“Consumers, particularly in the lower-income end, are being forced to use their credit cards for everyday spending like gas and food,” said Tavares. “That’s because there’s been no other positive catalyst, like an increase in wages, to offset higher prices. It’s a cash-flow problem.”
While people are running up credit cards to pay for the basic necessities, they're also discovering they can do a lot of things for themselves they once paid others to do. The Washington Post reported that the Great Recession has “helped set off a change in behavior so pronounced marketers and businesses have coined a name for it. They call it 'insourcing': doing yourself what you once gladly paid others to do.”
Sales of starter sewing kits have shot up by 30 percent at Wal-Mart as families forgo the tailor. Landscaping companies have suffered a 7 percent drop in revenue over the past year. Procter & Gamble said that it has noticed more questions from customers about how to dye their hair at home to match salon coloring.
This is very sensible in normal circumstances, but bad for the economy in a downturn. Economists call it the “paradox of thrift” – people pulling back on spending when demand for goods and services is in a trough. The instinct to live within one's means helps keep demand down, which is ultimately the cause of our stubbornly high unemployment.
More Americans are also growing their own food, which is healthy, good for the environment and cheap. Seed supplier W. Atlee Burpee & Co. told the Associated Press that sales of “vegetables seeds and starter plants have jumped substantially in the past several years, with 30 percent growth in 2009,” and another 15-20 percent last year. According to the AP:
Forty-three million American households planned to grow at least some of their own food in 2009, a 19 percent increase from the estimated 36 million who did the year before, said the National Gardening Association, citing the most recent figures available. Spending on food gardening — including growing vegetables, fruit trees, berries and herbs — jumped 20 percent in one year to $3 billion in 2009 and stayed at that level last year, said Bruce Butterfield, research director for the nonprofit association.
As food prices remain high, those families appear to be sticking with their home gardens.
So people are doing what they have to in order to make ends meet, but obviously this isn't a happy story. People have a lot of needs that can't be addressed with a second job or a home garden – health care, a decent retirement and some semblance of economic security, to name a few. The Main Street economy needs jobs and rising wages to address the two pressing crises that Wall Street and the Washington Beltway appear to be largely unconcerned with.