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Tags: Newman | consumer | confidence | income

Yahoo's Newman: Americans Are Getting Used to Lowered Expectations

By    |   Monday, 15 December 2014 12:52 PM

Americans are becoming satisfied with less, judging from their high consumer sentiment even as their economic prospects are still in a slump, according to Yahoo Finance Senior Writer Rick Newman.

For instance, Newman said, the latest Thomson Reuters/University of Michigan consumer sentiment index has recovered to prerecession levels, but gives a false impression of recovery.

"It hasn't. The real story may be that Americans have gradually adjusted their expectations downward and are now satisfied with less."

For starters, he noted real median household income, adjusted for inflation, is still about 5 percent below its pre-meltdown 2007 levels.

"Forecasting firm IHS Global Insight estimates real household income may not reach new highs until 2019, which would be an astonishing 12-year period of backsliding. This one indicator may be the best measure of middle-class woes, because it captures the debilitating decline in spending power of the typical family," Newman wrote.

In addition, the jobless rate was only 5 percent at the end of 2007, but today the official rate is still 5.8 percent. And that's even after the government fails to count the millions of Americans who have given up looking for work and are not considered in the unemployed totals.

"We do have more people working now, but a much larger portion of them are part-timers, with the number of full-time workers still 2.2 million lower than at the end of 2007."

Another measure of consumer financial health is home values, Newman stated. Home values are still about 8 percent beneath pre-recession levels, according to S&P Case-Shiller national home price index. In some regions, home values are even lower than in 2007.

"People are down on America. More Americans think the country is on the wrong track now than felt that way before the recession. . . . Perhaps more telling are Gallup surveys showing trust in government, banks and other institutions has fallen sharply during the last seven or eight years. Americans feel the pillars much of the country is built on are crumbling."

Newman said falling gasoline prices might be part of the reason Americans are feeling better about its lot in life, since energy costs have such a big pocketbook impact.

"But part of the improved outlook also probably stems from adjustments people have made in their spending habits, career goals and lifestyle wants and needs. There's scientific research showing that the key to happiness is lowering expectations, and economic conditions during the last eight years have readily accommodated that."

A new Gallup survey showed nearly six in 10 Americans said in November that their standard of living was getting better (58 percent).

A statement from the survey firm said, "Even as Gallup's indicators of the public's views of the national economy approach new heights, Americans' views about their own finances and self-reported financial habits have shown, at best, only moderate improvement compared with their two-year averages.

"Importantly — as has consistently been the case — large majorities of Americans continue to say they are watching their spending very closely (88 percent) and are cutting back on spending (61 percent)."

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Americans are becoming satisfied with less, judging from their high consumer sentiment even as their economic prospects are still in a slump, according to Yahoo Finance senior writer Rick Newman.
Newman, consumer, confidence, income
Monday, 15 December 2014 12:52 PM
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