Yesterday, we learned from the BEA how consumer spending has made a full recovery, with real personal consumption expenditures (PCE) in September hitting its highest level since the crisis began. A chart of this from Carpe Diem is shown below.
Meanwhile, the U.S. economy has almost fully recovered, even in real GDP terms, as shown below. A few more periods of growth and U.S. GDP will be making record highs again.
However, oddly, joblessness remains extremely high, with the unemployment rate at 9.6% in September — the same month that showed the full recovery for consumer spending above.
Huge swathes of Americans are still struggling to meet their basic needs, are stretched by debt, or sit on large unrealized housing losses. The U.S. poverty rate recently hit a 15-year high.
Negative facts such as these have caused sceptics, since early 2009, to think a U.S. recovery was impossible. Look at unemployment, look at housing, look at the poverty rate… they’re all still horrible.
But here’s a thought — What if a large chunk of American consumers don’t really matter? Then, the entire situation is far less perplexing, and in fact, it turns out that the richest 5% of America accounts for a massive 37% of all consumer spending according to North Carolina State University. That’s gargantuan, and maybe is the reason why many recovery sceptics have been proven so wrong ever since mid-2009. Yes tons of Americans are still in horrible shape, but they are, sadly, just a drop in the economic bucket relative to their ultra rich compatriots.
For better or worse, that’s at least how the economics of America appear.