American Consumers Newsletter
by Cheryl Russell, Editorial Director, New Strategist Press
Spending Rises, But Incomes Are Flat
RACIAL AND ETHNIC DIVERSITY 7th ed.
HOUSEHOLD SPENDING 18th ed.
AMERICAN GENERATIONS 8th ed.
AMERICAN MEN AND WOMEN 2nd ed.
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%)
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)
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%)
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.
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%)
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%)
BET YOU DIDN’T KNOW
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.
3. Cool Research Links
To keep up-to-date on ever-changing demographics and lifestyles, check out these useful links.
BET YOU DIDN’T KNOW
Percentage of households that include children (of any age), by generation of householder…
Generation X: 65%
Baby Boom: 34%
Older Americans: 13%
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!
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.
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