American Consumers Newsletter

by Cheryl Russell, Editorial Director, New Strategist Press
September 2013

Spending Rises, But Incomes Are Flat
IN THIS ISSUE:
1. Hot Trends: SPENDING RISES, BUT INCOMES ARE FLAT
2. Q & A: WHY ARE WE HEALTH INSURANCE DUMMIES?
3. Cool Links: 2012 SPENDING, 2012 INCOMES, 2012 AMERICAN COMMUNITY SURVEY
4. All New Editions of our Reference Tools:
RACIAL AND ETHNIC DIVERSITY 7th ed.
HOUSEHOLD SPENDING 18th ed.
AMERICAN GENERATIONS 8th ed.
AMERICAN MEN AND WOMEN 2nd ed.
To see Cheryl Russell’s Demo Memo blog, click here.

1. Hot Trends 

Household Spending Rises

Now for some good news: $51,442. That’s how much the average household spent in 2012, according to the Consumer Expenditure Survey. For the first time since 2008, average household expenditures surpassed $50,000–nominally at least. After adjusting for inflation, average household spending was at the highest level since 2009 and well above the $50,725 of 2000. But spending in 2012 was still 6.7 percent below the peak spending year of 2006, when the average household spent $55,119 (in 2012 dollars).

 

But that’s quibbling. The good news is that household spending climbed by 1.4 percent between 2011 and 2012, after adjusting for inflation–the biggest increase in real spending since the gain that occurred between 2004 and 2005 (driven by the housing bubble).

 

Household Spending by Age: 2012

Households in all but one age group spent more in 2012 than in 2011, according to the Consumer Expenditure Survey. Spending gains were greatest for householders aged 45 to 54 (up 4.8 percent), after adjusting for inflation. This gain was much bigger than the 1.4 percent increase for the average household. Householders aged 35 to 44 were the only ones to experience an ongoing spending decline–an 0.7 percent loss in average annual household spending between 2011 and 2012.

 

Although average annual household spending increased between 2011 and 2012, it remains 6.7 percent below the $55,119 peak of 2006, after adjusting for inflation. Only one age group made gains between 2006 and 2012: householders aged 65 or older boosted their spending by 1.2 percent during those years.

 

Household spending by age, 2012

(and percent change since peak year of 2006; in 2012 dollars)

Average household: $51,442 (-6.7%)

Under age 25: $31,411 (-2.1%)

Aged 25 to 34: $49,544 (-8.6%)

Aged 35 to 44: $58,069 (-11.3%)

Aged 45 to 54: $62,103 (-5.3%)

Aged 55 to 64: $55,636 (-3.8%)

Aged 65-plus: $40,410 (+1.2%)

 

Household Spending by Race and Hispanic Origin: 2012

Black household spending climbed by a substantial 3.3 percent between 2011 and 2012, after adjusting for inflation. This gain outpaced that of every other race and Hispanic origin group, according to results of the 2012 Consumer Expenditure Survey. In contrast, Hispanic spending fell 1.6 percent between 2011 and 2012, Asians saw no change in spending, and the gain for non-Hispanic whites was just 1.7 percent.

 

The average household spent $51,442 in 2012. This was 6.7 percent less than the $55,119 spending peak of 2006, after adjusting for inflation. Black households spent only 1.9 percent less in 2012 than in 2006. In contrast, Hispanic household spending fell 13.8 percent during those years. Non-Hispanic white spending was 6.3 percent lower in 2012 than in 2006, and Asian household spending was 5.8 percent lower.

 

Household spending by race and Hispanic origin, 2012

(and percent change since peak year of 2006; in 2012 dollars)

Average household: $51,442 (-6.7%)

Asian households: $61,399 (-6.3%)

Black households: $38,627 (-1.9%)

Hispanic households: $42,268 (-13.8%)

Non-Hispanic white households: $55,097 (-5.8%)

 

Median Household Income in 2012

The $51,017 median household income of 2012 was not significantly different from the $51,100 of 2011, after adjusting for inflation. The Census Bureau’s 2012 income statistics reveal little change in household income between 2011 and 2012 by age of householder, race and Hispanic origin of householder, or household type.

 

Nationally, median household income in 2012 was 8.3 percent below the $55,627 median of 2007 and 9.0 percent below the all-time high of $56,080 in 1999, after adjusting for inflation. In every year since 2007, median household income has declined–until this year. The finding of no change in 2012 may not be very interesting, but it is good news.

 

Median household income (in 2012 dollars)

2012: $51,017

2011: $51,100

2010: $51,892

2009: $53,285

2008: $53,644

2007: $55,627

 

Income by Age of Householder, 2012

Median household income by age of householder did not change significantly between 2011 and 2012, according to the Census Bureau. That stability is good news, because incomes fell each year between 2007 and 2011. All but the oldest age group have a long way to go before they catch up to where they were five years ago.

 

Median household income in 2012

(and percent change 2007-12; in 2012 dollars)

Total households: $51,017 (-8.3%)

Under age 25: $30,604 (-13.1%)

Aged 25 to 34: $51,381 (-9.1%)

Aged 35 to 44: $63,629 (-7.5%)

Aged 45 to 54: $66,411 (-8.4%)

Aged 55 to 64: $58,626 (-7.7%)

Aged 65-plus: $33,848 (+8.0%)

 

City Incomes Are Growing

Although median household income was unchanged in most demographic segments between 2011 and 2012, according to the Census Bureau, one of the few exceptions was cities. Median household income grew strongly in the nation’s cities between 2011 and 2012, which may explain why city populations are growing again. In the major cities of the nation’s metropolitan areas, median household income grew 3.2 percent. In contrast, median income did not change significantly for households in suburbs or nonmetro areas.

 

Median household income in 2012

(and percent change 2011-12; in 2012 dollars)

Households in cities of metro areas: $45,902 (+3.2%)

Households in the suburbs of metro areas: $58,780 (+0.5%)

Households outside of metropolitan areas: $41,198 (-0.4%)

 

The Shocking Truth about How the Government Measures Elderly Income

Older Americans are faring much better than younger ones, and they have been for well more than a decade. Between 2000 and 2012, the median income of households headed by people aged 65 or older grew 10 percent, after adjusting for inflation. At the same time, the median income of households headed by adults under age 55 fell by a steep 11 to 18 percent.

 

Now we find out it’s even worse than we thought. Little known fact: when measuring household income, the government does not count money withdrawn from defined-contribution retirement accounts. That’s right, the Current Population Survey, the American Community Survey, and the Survey of Income and Program Participation do not count withdrawals from IRAs and 401(k)s unless they are taken as annuities–a rare occurrence these days.

 

We’re not talking pocket change here. According to a Social Security Bulletin study, one in five households headed by a person aged 65 or older withdrew money from a defined-contribution retirement account in 2009 (the most recent year analyzed). The median withdrawal was $3,300. Among those who took distributions, median household income grew from $42,000 to $50,000–an 18 percent boost.

 

The authors of the study conclude with this warning: “If household surveys–especially the CPS, which is used to develop official estimates of household income and the number of persons in poverty–do not accurately identify sources and amounts of income, they will provide misleading results. Inaccurate statistics about household income could lead to inappropriate policies.”

 

College Enrollment Plunges

College enrollment fell by nearly half a million between 2011 and 2012, according to the Census Bureau, which described the decline as a “plunge.” The 467,000 decline was only the second since 2000. (Between 2005 and 2006, college enrollment fell by 240,000.) The college enrollment figure includes two-year, four-year, and graduate schools. In 2012, the nation’s colleges enrolled 19.9 million students compared with 20.4 million in 2011. Here are the trends by type of school…

Two-year schools Student enrollment climbed by 125,000 at two-year schools between 2011 and 2012. The 5.8 million enrolled at two-year schools in 2012 was not far off the 2010 record high of 5.9 million.

Four-year schools Almost all the decline in college enrollment occurred at four-year schools. Enrollment fell by 580,000, from 10.9 million to 10.3 million. Most of the drop occurred among full-time students at public schools, with the number falling by 377,000 (a 5 percent decline). The number of full-time students at private schools fell by 37,000 (a 2 percent decline).

Graduate schools Graduate school enrollment was fairly stable between 2011 and 2012, falling by just 13,000. This decline was less than the drop in the previous year. The 3.8 million enrolled in graduate school in 2012 was not far off the 2010 record high of 3.9 million.

 

With the unemployment rate declining and jobs more plentiful, it is not surprising that college enrollment is shrinking. Millions of men and women enrolled in college in recent years to avoid the difficult job market. As the economy improved, the decline in college enrollment was predictable. What is surprising, however, is how disproportionately the decline has hit public four-year schools.

 

1 Million Fewer  

Non-Hispanic Whites in College

The number of non-Hispanic whites enrolled in college fell sharply between 2011 and 2012, according to the Census Bureau. In 2012, there were 1 million fewer non-Hispanic whites at the nation’s two-year, four-year, and graduate schools–an 8 percent decline in just one year.

 

In contrast to the decline among non-Hispanic whites, the number of Hispanics enrolled in college increased between 2011 and 2012 and is at an all-time high. Asian enrollment also reached an all-time high. Black enrollment fell slightly between 2011 and 2012, but remains above 3 million and close to the all-time high.

 

Looking at the longer trend, non-Hispanic white college enrollment grew 10 percent between 2000 and 2012. Asian enrollment climbed 38 percent, black enrollment was up by 40 percent, and Hispanic enrollment more than doubled with a 138 percent rise. The non-Hispanic white share of college students fell from 69 to 58 percent during those years.

 

College enrollment by race and Hispanic origin, 2012

(and percent distribution)

Total: 19,930,000 (100%)

Asian: 1,447,000 (7%)

Black: 3,038,000 (15%)

Hispanic: 3,400,000 (17%)

Non-Hispanic white: 11,650,000 (58%)

Baby Bust Update: 8% Birth Decline

According to preliminary estimates for 2012, the baby bust continues but the decline is slowing. The nation’s 2012 fertility rate was 63.0 births per 1,000 women aged 15 to 44, the lowest on record and 9.4 percent below the 2007 high of 69.5. The fertility rate of women under age 30 is at a record low, but the rate among women aged 30 to 34 climbed slightly between 2011 and 2012 as those who had been postponing childbearing played catchup.

 

Overall, 3,952,937 babies were born in 2012, according to the National Center for Health Statistics. This was 8.4 percent below the 4,316,233 born in the peak birth year of 2007. So far, the Great Recession baby bust is not as deep as the 10.7 percent Great Depression bust, and it’s not likely to reach that level because the decline is slowing. For some perspective, keep in mind that the decline in births from the peak year of the baby boom in 1957 to the trough year of the baby bust (Generation X) in 1973 was a much larger 27 percent.

 

Number of births by race and Hispanic origin, 2012

(and percent distribution)

Total: 3,952,937 (100.0%)

Asian: 272,949 (6.9%)

Black: 583,080 (14.8%)

Hispanic: 907,405 (23.0%)

Non-Hispanic white: 2,133,115 (54.0%)

 

These are a sampling of posts published in the past few weeks in Cheryl Russell’s Demo Memo blog. Please send questions or comments to demographics@newstrategist.com.

BET YOU DIDN’T KNOW

Married couples with children aged 6 to 17 are the best customers of digital book readers, spending 88 percent more than the average household on these devices.

 

2. Q & A

Why Are We Such Dummies  

about Health Insurance?

Let’s face it: most of the public does not understand health insurance. That’s the finding of a Carnegie Mellon University economist who quizzed Americans on the meaning of common health insurance terms such as co-pay, co-insurance, and deductible. Only 14 percent could answer the four questions on the simple test correctly, according to the Washington Post.

 

With so little understanding of health insurance, asking the public what it thinks about the Affordable Care Act (ACA) is an exercise in futility. Many pollsters are doing just that, however, and the answers are all over the place. According to the most recent Kaiser poll, only 37 percent of the public has a favorable view of the ACA. Yet the 51 percent majority says it doesn’t have enough information about the law to understand how it will affect them. But 71 percent think the law won’t affect them or that it will make things worse for them. Yet 57 percent live in a household in which someone has a pre-existing condition. Apparently, the public doesn’t know that the Affordable Care Act will prevent insurance companies from denying insurance to those with pre-existing conditions. And so it goes.

 

The confusion about the Affordable Care Act springs from the fact that Americans are sheltered from health insurance realities. Only 8 percent purchase insurance on their own and know the difficulty of navigating the marketplace. Americans are health insurance dummies because most are shielded from the truth by employers and federal programs. Forty-eight percent get health insurance through an employer who pays the bulk of the premium. Another 16 percent are covered by Medicare, a program for the nation’s elderly, many of whom are unaware that the federal government and the nation’s taxpayers foot most of the bill.

 

Right now it doesn’t matter what the public thinks about the Affordable Care Act, because the public doesn’t know much. During the next few months, millions of Americans will be getting an education about health insurance. Once schooled, their opinions may start to matter.

BET YOU DIDN’T KNOW

The number of non-Hispanic whites in the United States will decline by 11 million between 2012 and 2050.

 

3. Cool Research Links

To keep up-to-date on ever-changing demographics and lifestyles, check out these useful links.

 

The latest summary data on household spending is available at this link. The Bureau of Labor Statistics’ Consumer Expenditure Survey provides a comprehensive look at the spending of American households by a variety of demographic characteristics. Detailed spending statistics are available from the BLS by special request or can be accessed in New Strategist’s annual publication Household Spending: Who Spends How Much on What, which can be downloaded as a PDF with links to Excel spreadsheets of each data table.

 

2012 Income  

The Census Bureau’s latest annual updates of the nation’s official income, poverty, and health insurance statistics are available at this site. The 2012 data show little socioeconomic change, in part because of the slow recovery from the Great Recession. At this site you can tap into all the 2012 numbers as well as historical trends.

 

2012 American Community Survey   

This link will take you to the Census Bureau’s American Factfinder web site where you can access the 2012 American Community Survey. This annual survey provides demographic and socioeconomic data for the nation, states, metropolitan areas, and cities. The American Community Survey replaced the census long form and provides detailed local area statistics on a regular basis. Although using the site can be intimidating, once you figure out the navigation the entire nation is at your fingertips.

BET YOU DIDN’T KNOW

Percentage of households that include children (of any age), by generation of householder…

Millennial: 47%
Generation X: 65%
Baby Boom: 34%
Older Americans: 13%

4. MEET YOUR CUSTOMERS

Here are four all new and expanded one-stop resources for understanding American consumers–vital, cost-effective information. Get the answers you need for business success in today’s competitive economy!

 

The 7th edition of Racial and Ethnic Diversity is a profile of a U.S. population that is growing more diverse much faster than many had predicted. Today, more than 100 million Americans are African American, Hispanic, or Asian. Hispanics are the largest minority, Asians are the most affluent, and blacks have made big gains in education and earnings. We have crossed a threshold from what will be to what is: we are the multicultural nation that had been forecast for so many decades.

Racial and Ethnic Diversity has the numbers and analysis you need to understand our multicultural society. It includes a chapter on attitudes by race and Hispanic origin based on data form the 2012 General Social Survey. It includes detailed estimates and projections of the U.S. population, showing how soon minorities will outnumber non-Hispanic whites. Racial and Ethnic Diversity also has socioeconomic data on blacks, Hispanics, and Asians. American Indians are also profiled, when data are available.

 

You can see the book’s introduction, table of contents, index, and sample pages on New Strategist’s web site where you can also download this unique reference tool as a PDF linked to Excel spreadsheets of all data tables

Paperback: $94.95 (978-1-940308-01-2) 798 pages

 

Looking for customers? Repositioning your products? Americans are spending money, but only those who are on top of the trends will know who is spending. The just-published 18th edition of Household Spending reveals who is spending and the products and services they buy. In this edition are comparisons of spending before (2000-06) and after (2006-11) the Great Recession.

 

The annual spending data in Household Spending, the first edition of which was published more than twenty years ago in 1991, allow you to compare and contrast spending by a host of demographic characteristics. With this vital information, which is not available online, you can determine market potential, identify your best customers, and understand which segments account for the largest share of spending. You get the answers by the demographics that count–age, income, high-income households, household type, region of residence, race and Hispanic origin, and education.

 

You can see the book’s introduction, table of contents, index, and sample pages on New Strategist’s web site, where you can also download this unique reference tool as a PDF linked to Excel spreadsheets of all data tables

Hardcover: $125.00 (978-1-940308-06-7) 612 pages

Paper: $94.95 (978-1-940308-07-4)

 

For decades, the U.S. population has been fragmented by generation. The all-new 8th edition of American Generations:Who They Are and How They Live is the tool for piecing together those fragments and seeing the whole. It is the resource for researchers who want to compare and contrast the living generations of Americans — iGeneration, Millennial, Generation X, Baby Boom, Swing, and World War II. This edition of American Generations includes a peak at the new Recession Generation. It provides 2012 attitudes data by generation (produced by New Strategist’s editors) from the General Social Survey, unpublished 2011 time use data from the American Time Use Survey, and income, housing, labor force, spending and wealth data.

Today’s world is changing rapidly. People who are as little as 10 years apart in age can have very different experiences, making them unlike one another in significant ways. American Generations reveals the differences. The age and generational profiles in the book are an invaluable resource for marketers, advertisers, entrepreneurs, and businesses large and small.
You can see the book’s introduction, table of contents, index, and sample pages on New Strategist’s web site, where you can also download this unique reference tools as a PDF linked to Excel spreadsheets of all data tables.

Hardcover: $120.00 (978-1-940308-02-9) 466 pages

Paper: $89.95 (978-1-940308-03-6)

The second edition of American Men and Women: Who They Are and How They Live examines the many dimensions of our changing lives. The nation’s men and women are not who they used to be, their roles revolutionized over the past half century. Those roles are still fluid and evolving. Today’s young adults are postponing marriage and childbearing, creating a new baby bust. Young women are better educated than young men, and many have higher incomes as well. Tracking these changes has become more important than ever as businesses compete for customers.

 

American Men and Women is divided into ten chapters: Attitudes, Education, Health, Income, Labor Force, Living Arrangements, Population, Spending, Time Use, and Wealth. The attitudes chapter, based on data from the 2012 General Social Survey, compares what men and women think and examines how their attitudes differ by age. Also included in this book is a chapter on time use based on unpublished data from the invaluable American Time Use Survey. American Men and Women also provides the latest labor force projections, the latest population projections, and statistics on income, labor force participation, living arrangements, health status, spending and wealth.

 

You can see the book’s introduction, table of contents, index, and sample pages on New Strategist’s web site, where you can also download this unique reference tool as a PDF linked to Excel spreadsheets of all data tables.

Paper: $89.95 (978-1-940308-05-0) 452 pages

BET YOU DIDN’T KNOW

Percentage of 25-to-34-year-olds who were without health insurance at some point in the past 12 months, by sex…

Men: 40.0%
Women: 30.5%