Consumer confidence increase masks crashing incomes, rising poverty rate

Zachary Snider Contributor
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The Conference Board reported on Sept. 25 that the Consumer Confidence Index, a survey which measures the public’s economic optimism based on spending and saving habits, eclipsed 70 this month, marking a near 24-point rise in the past year in an indication of increasing optimism in the economy.

But the organization was quick to note that consumers don’t believe the U.S. economy is out of the woods.

“A consumer confidence of 90 is typically what represents a positive public opinion,” said Lynn Franco, director of economic indicators for the Conference Board. “There are more pessimists than optimists at this point.”

This month’s results came amid a series of studies that indicate increasing economic strife and a widening gap between the upper class and the rest of Americans.

A Sentier Research report found that median household incomes fell 1.1 percent in August to just under $50,700. The study also found that median household incomes are down 5.7 percent since the economic recovery began in June 2009 and eight percent since President Barack Obama took office.

The U.S. Census Bureau released its annual report earlier this month showing a six percent increase in the number of Americans living in poverty from 2009-11 — an additional 3 million people. The report also found that only the wealthiest 20 percent of households saw income increases and, for the middle 20 percent, inflation-adjusted household income is the lowest it has been since 1995.

While median incomes continue to fall, health care costs are on the rise according to a Health Care Cost Institute report, which found that per capita health care costs jumped 4.6 percent in 2011.

The number of uninsured citizens is up 1 million in the first three months of 2012 compared to 2011 finds a report by the Centers for Disease Control and Prevention.

The U.S. Department of Agriculture reports a 34 percent increase in the number of people on food stamps from June 2009 to June 2012.

The Bureau of Labor Statistics reports a 30-year low in labor force participation at 63.5 per cent.

But despite the multitude of gloomy reports, the Consumer Confidence Index increased 23.9 points in the last year, from 46.4 in Sept. 2011 to 70.3 in Sept. 2012.

Public confidence in the economy declined sharply in coincidence with America’s economic crisis beginning in late 2007 and has remained somewhat depressed.

“There’s been a lot of volatility coming out of this recession,” said Franco. “Recovery hasn’t followed the same pattern as it has in past recessions.”

Franco referenced a “three-fold hit” to the economy that includes the housing market, the job market and the stock market.

“The stock market and the job market have somewhat recovered,” Franco said. “The housing market was the laggard of the three … but appears to have turned the corner.”

The housing index has increased each month this year, a Reuters study found. Reuters also reported that mortgage delinquency is at a three year low, mortgage applications are rising as interest rates go down and home resales are the highest they have been in two years.

“The economy still has a ways to go,” said Franco. “Consumer confidence and expectations for both jobs and income remain at historically weak levels.”

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