American Consumers Newsletter

by Cheryl Russell, Editorial Director, New Strategist Press
January 2011

It’s the Internet Stupid, Part II


To see Cheryl Russell’s Demo Memo blog, click here.

1. Hot Trends 

It’s the Internet Stupid, Part II
They keep trying to paste a smiley face on the numbers. “They” are the pundits, politicians, realtors, retailers, bankers, and everyone else whose livelihood depends on pretending that the Great Recession is just like all the others since World War II–a blip, a momentary pause, a temporary departure from the norm.


SMILEY FACE: New home sales were up 5.5 percent in November! REALITY: New home sales were 21 percent below their November 2009 level.


SMILEY FACE: The unemployment rate fell in December!

REALITY: The job increase was well below expectations.


SMILEY FACE: Retail sales climbed 0.6 percent in December! REALITY: The biggest gains were in energy and food, and department store sales fell.


This is not a run of the mill recession, a blip, or temporary. This is a massive economic dislocation caused by the Internet. It is not over, it may get worse before it gets better, and it is not likely to get better for a generation. These numbers tell the story.


More than 1 million homes were foreclosed in 2010, a record. The story begins with business. It is the nature of private enterprise to seek out and exploit every advantage in the marketplace. That is what business is supposed to do, and that is what it is doing. Those who were first to understand the Internet have used it to their advantage by globalizing their business, finding cheaper sources of labor and materials, and setting up systems that profit from instantaneous communication. Because of the Internet, the average stock is owned for only 22 seconds, according to economists. The speed of transactions creates an opportunity for entrepreneurs, but also opens the door to Internet savvy con men and crooks who can buy low and sell high in ways that our regulatory system has yet to comprehend. The Internet, and its crooks and con men, brought us the housing bubble and the foreclosure mess.


4.5 million Americans have been unemployed for a year or longer, a record. (Bureau of Labor Statistics) Never before have so many American workers been unemployed for so long. Labor markets are in turmoil because the Internet has eliminated time and distance as barriers to business. Those with digital skills are making a living. But most of us–our livelihoods dependent on pre-Internet business models–are only muddling through. A large segment of workers faces economic catastrophe. With unemployment above 9 percent and no sign that it will fall much for years, this is a structural realignment. Companies with pre-Internet profit models are either collapsing entirely or ridding themselves of workers who are not Internet savvy–usually the older workers. Among the unemployed, those aged 55 or older are having the hardest time finding a job. Forty-one percent have been unemployed for a year or longer.


Median household net worth fell 30 percent between 2007 and 2009. (Federal Reserve Board) Now on to the politicians, most of whom are standing idly by as the Internet’s crooks and con men destroy the middle class. This is not a right versus left thing. This is not a Republican Party versus Democratic Party thing. This is an old versus young thing. The 111th Congress was one of the oldest in U.S. history.  The 112th Congress is not much younger. The median age of the current House of Representatives is 57. The median age of the Senate is an even older 61. Few of our elected representatives are fluent in digital. The problem is not that many of our politicians must depend on their younger staff to help them turn on a computer, use a keyboard, surf the web, text, or twitter. The problem is that they cannot comprehend how the Internet is transforming our world. They are intellectually incapable of crafting policies that will help us cope with our new problems or take advantage of our new opportunities. It will take a generation of elections before politicians fluent in digital replace the elderly statesmen from the paper and ink era.


Meanwhile, we are sitting ducks.


By Cheryl Russell, editorial director, New Strategist Publications. If you have questions or comments about the above editorial, contact


During an average week, 18 percent of households buy gifts for people in other households.

Source: American Buyers: Demographics of Shopping

2. Q & A

Will Boomers Bankrupt Social Security?

No they will not. Not even close. The nation’s policymakers have been preparing for the baby boom’s retirement for decades. Way back in 1983, Congress raised the age at which younger generations would become eligible to receive full Social Security benefits, the increase starting with those born in 1938. The oldest boomers were born in 1946, and they turn 65 this year. But they will not be eligible to receive their full Social Security benefit until next year–at age 66. Boomers born in 1960 or later will not receive their full benefit until age 67. When you hear angry voices demanding that the federal government raise the Social Security retirement age, know this: the government already did.

And it worked. The Social Security system will remain solvent for the foreseeable future–except that the politicians squandered instead of saved the money pouring into the trust fund, leaving Social Security with a bunch of IOUs. But that is a political problem, not a problem with the Social Security system itself. Social Security also faces a temporary squeeze for the few years when the entire baby-boom generation will be collecting retirement benefits. The amount paid into Social Security by the nation’s workers will fall below the amount paid out to the nation’s retirees in 2037. A little tweaking will make up the difference, however–such as raising the $106,800 cap on wages subject to Social Security tax. But even if the government does nothing to make up the shortfall, the trust fund would still be able to pay 75 percent of promised benefits indefinitely.

By Cheryl Russell, editorial director, New Strategist Publications. If you have any questions or comments about the above Q & A, contact


Rank of Social Security tax payments among items on which the average household spends the most: 1.

Source: Household Spending: Who Spends How Much on What, 15th edition

3. Cool Research Links

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

Few Account for Most Health Care Expenses
It is no surprise that health care costs are highly concentrated among those experiencing a health care crisis. But the degree of concentration is surprising. Just 1 percent of the U.S. population accounted for 20 percent of health care spending in 2008, according to a new analysis of Medical Expenditure Panel Survey data available at this link. Five percent of U.S. residents accounted for nearly half the nation’s health care spending.

Housing Bust Destroyed Millions of Jobs
This analysis by the Bureau of Labor Statistics, published in the December Monthly Labor Review, examines how many jobs were created–and destroyed–by the housing bubble. The BLS estimates that the housing bust zapped up to 2.2 million residential-construction related jobs between 2005 and 2008. Those jobs will not be returning anytime soon. BLS projections show that only 60 percent of residential-construction related jobs lost will be recovered by 2018.

Median Duration of Unemployment by State
Another meaty piece in the December Monthly Labor Review is this look at the duration of unemployment by state in 2009. In the U.S. as a whole, the unemployed had been out of work a median of 15.1 weeks in 2009, up from 9.4 weeks in 2008. By state, the unemployed were having the hardest time finding a job in Michigan (19.7 weeks) and South Carolina (19.6 weeks). They were having the easiest time in North Dakota (7.8 weeks).


Biggest out-of-pocket spenders on dental services: Householders aged 65 to 74.

Source: Best Customers, 7th edition

4. Find out how American Consumers Spend their Money

Consumers are slashing their spending, making it vital to get the answers to Who buys? What do they buy? How much do they spend? And, most importantly, what will they cut as their incomes fall and expenses rise?

  • NEW TITLE American Buyers: Demographics of Shopping is a groundbreaking new guide to buying patterns, essential information in these difficult economic times. Its weekly and quarterly spending data show you how many households buy certain products and services and how much buyers pay for them, all broken down by age, household income, household type, race and Hispanic origin, region of residence, and education.
  • Starting a new business? Repositioning your products? In the new 15th edition of the annually updatedHousehold Spending: Who Spends How Much on What, you get dollar-for-dollar answers to who is buying hundreds of products and services ranging from laundry detergent and phone cards to motorcycles, wine, and restaurant meals.
  • Best Customers: Demographics of Consumer Demand, 7th ed., is a unique guide to how changing demographics are reshaping the consumer marketplace. Find out who spends the most and who controls market share–often surprisingly different–for over 300 products and services.
  • The 14 volumes in the Who’s Buying Series, which can be purchased individually or as a set, give you the big picture about consumer spending by age, income, household type, race, Hispanic origin, region of residence, and education. Each volume focuses on an individual product category, ranging from apparel and beverages to restaurants, consumer electronics, and travel.

For your convenience, New Strategist’s titles are available as searchable single- and multiple-user pdfs that are linked to spreadsheets of all the data tables in each book so you can do your own analyses and create PowerPoint presentations.


Percent change in average household spending on prepared food from supermarket delis, 2000 to 2008: +56%

Source: Who’s Buying Groceries, 8th edition