Before the US goes to war, there is a large segment of people that know. The final determination – not official in the press – is official in the market. You see, the government starts buying necessities like toilet paper by the truck load. They stock up. The decision is made as soon as they sign the purchase order.
So where do you look first for a downturn in the economy? Do you look to the stock market? No. Do you look to the Federal Reserve? No. Do you look to surveys? No. You look to PB&J. You look to spaghetti. The economy takes root in spending. If people start adjusting their spending en mass, then you know they know something you don’t know.
An AP story highlights these adjustments. The story is by Anne D’Innocenzio and is called Working Class Stretched Thin. D’Innocenzio points to the rise in prices of grocery supplies and utilities as rising faster than income. Here are some lines I pulled:
- With the fastest-rising food and energy prices since the 1980s
- From Family Dollar to Wal-Mart, merchants have adjusted their product
mix and pricing accordingly. Sales data show a marked and more
prolonged drop in spending in the days before shoppers get their
paychecks, when they buy only the barest essentials before splurging
around payday. - Her husband’s check from his job at a grocery store used to last four days. “Now, it lasts only two,”
- The pantry scrambled to feed 5,000 new families over the past 12 months, up almost 70 percent from 3,000 the year before.
- Gas prices hit a record nationwide average of $3.23 per gallon in late
May before receding a little, though prices are expected to soar again
later this year. Food costs have increased 4.5 percent over the past 12
months, partly because of higher fuel costs. Egg prices were 44 percent
higher, while milk was up 21.3 percent over the past 12 months to
nearly $4 a gallon, according to the Bureau of Labor Statistics. - And while overall wage growth is a solid 4.1 percent over the past 12
months, economists say the increases are mostly for the top earners.
I don’t even think this is a short term slow down either. I think this is a shift. As I noted in my Paul Krugman entry, the middle class is getting squeezed between the haves and haves nots. College costs are up to the point where reevaluating the benefit is now a consideration. And Alex Rodriguez, who didn’t go to college, is about to get a contact of 10 years for something around $30 million a year.
But what is amazing is that this isn’t necessarily a bad thing. Values are changing – at least in the US. There is a push to get more green, be more socially conscience, and to rediscover the family. None of these things requires a rich man.
Working Thoughts 