Monday, September 1, 2014

Too Many Consumers Don't Feel the Recovery

When the Great Recession began in 2007, the negative economic effects and consequences were immediate. Millions of consumers lost their jobs, homes and spending power.  Five years later, in 2012, the so-called experts declared the Great Recession was over.

However, in 2014, some seven years later, there are still too many consumers suffering from the negative impact of the Great Recession.  Although our economy is growing at an annualized rate of 4.2 percent, the good news isn't reaching the average consumer. Why not? There are three key indicators that tell the real story.

1. Wages are depressed. Since 2007, the average price of basic goods and services including clothing, food and housing has risen by 15 percent. Compare that to a 9% overall increase in wages for salaried employees during the same period. If you consider the 22% of consumers who rely solely on their minimum wage jobs for income, this group has fallen behind by nearly 12% in terms of their income purchasing power since 2007. Adding insult to injury, a recent Rutgers Poll reveals that 57% of respondents have "less or the same amount of earnings and savings today as they did five years ago." In other words, nearly 60 percent of American consumers are cash poor. This is not a good sign.

2. Consumers have lost faith in the American Dream.  Before 2007, over 70% of consumers indicated they believed it was possible to live the "American Dream" -- that is, get a quality education, find a good job, earn enough money to afford a home where they could raise their kids, and have some money left over for retirement or a rainy day fund.

Today, when asked that same question, the number of consumers who still believe in the American Dream has fallen to less than 40 percent. This statistic is alarming because it undermines the very foundation of our nation's economy. If educational opportunities, quality jobs and housing prices are out of reach for 60% of Americans, our nation is quickly becoming "the land of haves and have nots."

2. Consumers Can't Get Loans  Before 2007, borrowing money was easy, perhaps too easy. But, consumers were able to go to their banks and get an auto loan, a college loan, or money to remodel their kitchen. Today, main street banks are not lending money to most consumers because their credit scores have taken a serious hit due to the Great Recession. It's a vicious downward spiral.

While credit unions are trying to come to the rescue and help consumers borrow money, federal regulatory agencies like the National Credit Union Administration have all but frozen the ability of credit unions to enroll new members. This means that millions of American consumers, who seek the financial services of federal credit unions, can't even become members because the federal regulators won't allow federally-chartered credit unions, which they regulate, to add new members through  existing portals like associations and other legitimate groups.

It's a system that is terribly broken and antiquated for today's consumers, not to mention the emerging Millennial Generation comprised of over 75 million consumers between the ages of 14-33 years old, who rely exclusively on the Internet and "financial apps" for their banking needs. Why are federal credit unions being denied the opportunity to serve this group of consumers? It makes no sense.

These are the cold facts. They tell a much different story than what our political leaders and financial experts have been spouting for the past three years. Consider this. If you went to your doctor because you were sick, and they gave you a 50-50 chance of recovery, how would you feel?  The simple answer is "not optimistic!" Well, millions of  consumers are feeling the same way -- not optimistic!

So, here's the bad news. When the American Consumer Council recently asked its members if they were optimistic for their economic future, only 4 out of 10 responded "yes."  When 54 percent of America's consumers tell you that their financial status is "worse today than it was seven years ago," that's a clear indication that the Recovery is not over for most of us. It also calls into question the integrity of those political leaders and financial experts who have declared "good times are ahead for America." My question is, "Which America are they talking about?"

About the Author:
Thomas Hinton is president and CEO of the American Consumer Council, a non-profit consumer education organization with over 148,000 members.  Contact:

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