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Americans Playing With Less Fun Money


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The optimism of summer is officially fading and with that transition comes a new report from the Small Business & Entrepreneurship Council claiming Americans now have less disposable income in their pockets—a cautionary sign for anyone in the retail or restaurant spaces, in particular.

Although I’ve tended toward a generally bullish attitude on our economic future in recent months, a pronounced slowdown in the restaurant category along with reports like this from the SBE Council suggest the American economic recovery is slowing, if not stalling nine years after the technical end of the Great Recession.

“The bottom line is Americans have less disposable income than they should,” said Raymond Keating, SBE Council’s Chief Economist. “This is personal income less personal taxes, adjusted for population and inflation. This is the income from which people make purchases, and generate savings and investment—the part of Americans’ income they spend on consumer goods and help fuel the overall economy. Over the past near-decade, including the current period of recovery and expansion, real per capita income growth has been a mere fraction of the long-term norm.”

Included in the new report, which you can find HERE, are a host of interesting statistics:

  • Average annual growth in nonfarm business sector real compensation per hour, which includes wages, salaries and benefits paid to workers, registered 1.4 percent from 1956 to 2016, and 1.5 percent from 1956 to 2006. However, from 2007 to 2016 – covering the recession and subsequent recovery-expansion period – real compensation per hour growth averaged only 0.6 percent. And since the start of the recovery in mid-2009, again, growth has averaged a woeful 0.6 percent.
  • Real per hour compensation growth during this recovery has registered a mere 43 percent of what the average annual growth rate has been over the past six decades.
  • While the median household income has increased by 5.2 percent in 2015, over the last decade, there not only has been no growth in real median household income, it actually has decreased slightly, with the 2015 level coming in below the 2006 and 2007 levels.
  • Key number to consider: per capita real disposable personal income, which is personal income less personal taxes, adjusted for population and inflation. This is the income from which people make purchases, and generate savings and investment.
  • Consider that growth in per capita real personal disposable income during these recent years of recovery/expansion has registered as a fraction of the long-term average growth rate. The 0.9 percent rate of growth from 2009 to 2015 compared to the 1956-to-2015 average growth rate of 2.09 percent, and 2.3 percent for 1956 to 2006. That is, growth from 2009 to 2015 ran, again, at 43 percent of the long-run rate.
  • If per capita real personal disposable income grew at the average historic rate since 2009, real per capita personal disposable income would have registered $40,322 in 2015 versus the actual amount of $38,368 (both in real 2009 dollars). So, real average disposable personal income would have been $2,000 higher (2009 dollars) on average for individuals, and $8,000 higher for an average family of four.

“That lost income means lost money to purchase goods and services from small businesses, to save, and to invest, thereby further feeding into slower economic growth and job creation,” said Keating.

Keating also addressed recent news on the increase in real median household income in 2015 by arguing, “While it certainly was good news to see real median household income increase by 5.2 percent in 2015, this needs to be put in perspective. Over the last decade, there not only has been no growth in real median household income, but it actually has decreased slightly, with the 2015 level coming in below the 2006 and 2007 levels.”

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The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Tom KaiserTom Kaiser is associate editor of Franchise Times. He can be reached at 612.767.3209, or send story ideas to tkaiser@franchisetimes.com.
 
Beth EwenBeth Ewen is editor-in-chief of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
 
Nicholas UptonNicholas Upton is staff writer at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
 
Mary Jo LarsonLaura Michaels is managing editor of Franchise Times. She can be reached at 612.767.3210, or send story ideas to lmichaels@franchisetimes.com.
 
Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at
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Nancy WeingartnerNancy Weingartner is editor-at-large of Franchise Times magazine and the editor of the Food On Demand media project. You can reach her at 612-767-3200 or at nancyw@franchisetimes.com.
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