American Consumers Newsletter

by Cheryl Russell, Editorial Director, New Strategist Press
September 2009

This is the New Normal

1. Hot Trends

This is the New Normal

Brace yourself. The 2008 income statistics released by the Census Bureau last week document widespread economic pain. Unfortunately,  more is to come.

According to the Census Bureau, median household income fell by a substantial 3.6 percent between 2007 and 2008, after adjusting for inflation. The downward trend is likely to continue. In fact, the demographics guarantee it. Between 2007 and 2008, all but one age group (65+) saw its median household income decline. This is just a preview of what lies ahead as Americans adjust to a greatly diminished standard of living. During the past two decades, the demographic trends worked for us, creating boom times and record levels of affluence. Now the trends are working against us, impeding recovery and creating a new normal. Here’s why.

  • The Boomer bubble has burst: For two heady decades, the economy benefited from the Baby-Boom’s presence in the peak-earning age groups. The percentage of households with incomes of $100,000 or more climbed from 15 percent in 1990 to a peak of 21 percent in 2007, after adjusting for inflation, as Boomers boosted the number of affluent. The housing bubble and easy credit added fuel to this demographic fire. Families, businesses, and communities grew to depend on the pumped up spending. Now it is over. Boomers–who range in age from 45 to 63–are exiting the peak-earning age groups, the housing bubble has burst, and credit is tight. Out of necessity, Boomers are turning into savers, throwing a large, wet blanket on the consumer driven economy.
  • Gen Xers are in trouble: Big time. This is the generation that was left standing when the music stopped. Householders aged 35 to 44 are now the nation’s biggest spenders, outpacing higher-earning 45-to-54-year-olds, because of their oversized mortgages. The average mortgage interest spending of householders aged 35 to 44 is fully 27 percent greater than 45-to-54-year-olds, according to the Consumer Expenditure Survey. The housing debt of 35-to-44-year-olds ballooned by 23 percent between 2004 and 2007, after adjusting for inflation–a greater increase than any other age group, according to the Survey of Consumer Finances. Then the economy tanked. That explains why Gen Xers are least likely among the generations to be satisfied with their finances, according to the General Social Survey. If by some miracle Gen Xers manage to get back on their feet, their small numbers will not be enough to stoke the consumer engine.
  • Millennials are in a Depression: We may argue about whether this is the Great Recession or another Depression, but there is no doubt where Millennials stand. In August, unemployment among 16-to-19-year-olds hit an all-time high of 25.5 percent. Although the number of people aged 15 to 34 climbed by 390,000 between 2008 and 2009, the number of householders in the age group fell by 120,000 as fewer could afford to live independently. For Millennials, economic recovery is years away as their parents and grandparents crowd the job market. A new survey by Pew Research Center found that 63 percent of workers aged 50 to 61 might have to delay their retirement because of the downturn. It’s a Catch 22, because many of the Boomers who delay retirement will be supporting their Millennial children who cannot get jobs.

How do businesses survive the new normal? First, they need to accept the fact that business-as-usual is the road to bankruptcy. Second, they need to reinvent their products and services, and restructure their costs, to appeal to a weakened, chastened, and frightened middle-class that can no longer afford the homes, cars, vacations, or college educations that the old middle class took for granted.

By Cheryl Russell, editorial director, New Strategist Publications
For the latest income statistics, click here. For an in-depth look at the generations, see New Strategist’s American Generations series. If you have questions or comments about the above editorial, e-mail New Strategist at


Percentage of Gen Xers who are satisfied with their finances: 21.

Source: Generation X: Americans Born 1965 to 1976

2. Q & A

How Many Do Not Have Health Insurance?
46 million U.S. residents did not have health insurance in 2008, according to the Census Bureau. With incomes going down and poverty going up, it may seem surprising that the percentage of people without health insurance has remained essentially unchanged at 14 to 15 percent for the past eight years. In 2008, 15.4 percent of U.S. residents did not have health insurance.

There is a reason for this stability, and it is called Medicaid–the federal government’s health insurance program for the poor. A far larger percentage of Americans are covered by Medicaid today than a few years ago–particularly children. Since 2000, the percentage of people under age 18 who are on Medicaid has grown from 21 to 30 percent. Consequently, only 9.9 percent of the nation’s children did not have health insurance in 2008.

Universal coverage is the norm for nearly everyone aged 65 or older through Medicare, the federal government’s health insurance program for the elderly. In 2008, only 1.7 percent of U.S. residents aged 65 or older did not have health insurance.

Young adults are most likely to be uninsured. But the 29 percent of 18-to-24-year-olds who were uninsured in 2008 was not much greater than the 27 percent who were uninsured in 2000.

The situation is more dire among 25-to-54-year-olds, where the percentage without insurance is spiking. Among 25-to-34-year-olds, the figure climbed from 21 to 27 percent between 2000 and 2008. Among 35-to-44-year-olds, it rose from 15 to 19 percent. Among 45-to-54-year-olds–an age group in which health problems become much more common and severe–the uninsured increased from 12 to 16 percent. The increase was much smaller among 55-to-64-year-olds, with the figure climbing from 12 to 13 percent. Overall, 20 percent of working age adults (aged 18 to 64) did not have health insurance in 2008.

Note that the Census Bureau defines the uninsured as those who did not have health insurance during the entire year of 2008. Anyone who lost his or her insurance as the recession deepened during the year does not count among the uninsured.

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


Percentage of Americans aged 65 or older who are covered by the federal government’s Medicare health insurance program: 93.Percentage of older Americans who think the federal government should help people pay their medical bills: 40.

Source: Older Americans: A Changing Market

3. Find Out How American Consumers Spend Their Money

Here are six all new and expanded, one-stop resources for understanding who American consumers are and how they spend their money–vital, cost-effective information in these economically uncertain times. All are available as hold-in-your-hand books or pdf downloads with links to Excel spreadsheets. Go to newstrategist.comfor details and prices.

· The American Marketplace: Demographics and Spending Patterns, 9th ed.
As the Wall Street Journal said, “The American Marketplace should be on your bookshelf.” (978-1-935114-28-4)

· Racial and Ethnic Diversity: Asians, Blacks, Hispanics, Native Americans, and Whites, 6th ed.
The new sixth 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. (978-1-935114-27-7)

The American Generations Series, four volumes that examine the demographic and socioeconomic characteristics of each of the four living generations:

· The Millennials: Americans Born 1977 to 1994, 4th ed.
This generation spans the ages of 15 to 32 in 2009. The volume Includes a special supplement on the iGeneration, children under age 15. (978-1-935114-15-4)

· Generation X: Americans Born 1965 to 1976, 6th ed.
A small but vital generation spanning the ages of 33 to 44 in 2009. (978-1-935114-16-1)

· The Baby Boom: Americans Born 1946 to 1964, 6th ed.
The opinions and demographics of this large and influential generation is a barometer of where the entire nation stands. (978-1-935114-17-8)

· Older Americans: A Changing Market, 6th ed.
No segment of the population is changing as much as older Americans as it fills with Boomers. (978-1-935114-26-0)

For your convenience, all New Strategist titles are available as searchable single- and multiple-user pdfs that are linked to spreadsheets of the data tables for analysis and PowerPoint presentations.


Percentage of parents who think their children’s standard of living will be much better than their own standard of living, by race:

Black  53
White  25

Source: Racial and Ethnic Diversity: Asians, Blacks, Hispanics, Native Americans, and Whites