By almost every measure, the US’ economy is booming — but a look behind the headlines of roaring job growth and consumer spending reveals how the boom continues in large part by the poorer half of Americans fleecing their savings and piling up debt.
A Reuters analysis of US household data showed that the bottom 60 percent of income-earners have accounted for most of the rise in spending over the past two years, even as the their finances worsened — a break with a decades-old trend in which the top 40 percent primarily fueled consumption growth.
With borrowing costs on the rise, inflation picking up and the effects of US President Donald Trump’s tax cuts set to wear off, a negative shock — a further rise in gasoline prices or a jump in the cost of goods due to tariffs — could push those most vulnerable over the edge, some economists have said.
That in turn could threaten the second-longest US expansion, given that consumption makes up 70 percent of the US economy’s output.
To be sure, the housing market is far from the dangerous leverage reached in 2007, before the financial crash. With unemployment near its lowest since 2000 and job openings at record highs, people could also choose to work even more hours or take extra jobs, rather than cut back on spending if the money gets tight.
However, by filtering data on household finances and wages by income brackets, the analysis revealed growing financial stress among lower-income households, even as their contribution to consumption and the broad economy grows.
The data shows that the rise in median expenditures has outpaced pre-tax income for the lower 40 percent of earners in the five years to mid-last year, while the upper half has increased its financial cushion, deepening income disparities.
A hot job market and other signs of economic health encourage rich and poor alike to spend more, but tepid wage growth for many middle-class and lower-income Americans means that they need to dip into their savings and borrow more to do that.
As a result, over the past year, signs of financial fragility have been multiplying, with credit card and auto loan delinquencies on the rise, and savings plunging to their lowest since 2005.
In the past, rising incomes of the upper 40 percent of earners drove most of the consumption growth, but since 2016 consumer spending has been primarily fueled by a rundown in savings, mainly by the bottom 60 percent of earners, Oxford Economics said.
This in part reflects better access to credit for low-income borrowers late in the economic cycle. Yet it is the first time in two decades that lower earners made a greater contribution to spending growth
With inflation factored in, average hourly earnings dropped by US$0.01 in May from the same month last year for 80 percent of the country’s private sector workers, including those in the vast healthcare, fast food and manufacturing industries, US Bureau of Labor Statistics figures showed.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”