With a consensus building that we've now seen the worst of this recession, economists worry that the recovery won't happen unless consumer spending bounces up. And that's going to take a while. A disturbing poll hints at why: 61 percent of workers live paycheck to paycheck.
The number of people who wait anxiously for payday has skyrocketed from just 43 percent two years ago, according to the survey, by job-search website CareerBuilder.
Even people with six-figure salaries are not immune: 30 percent of workers earning $100,000 or more a year are also going payday-to-payday, up from 21 percent last year.
This is hardly a surprise. In a recent speech to investors, Wal-Mart Stores Inc. (WMT) chairman Mike Duke said the "paycheck cycle" in his stores has become much more marked in the last year. Sales dip sharply towards the end of the month, even for essential items, then spike on the first of the month, as people's paychecks come in. Some 24-hour stores even get a bump in traffic after midnight on the first of the month, he said.
Retailers may have been encouraged by the August sales results, but with unemployment pushing 10 percent, it's a bad sign when even people with jobs have trouble making it to payday. The CareerBuilder survey polled 4,478 full-time workers, not temps or part-timers.
And many are dipping into savings or putting off saving just to keep going, another bad omen for getting out of this credit crunch.
Twenty-one percent of the employees polled say they have cut back on 401(k) contributions or savings to make ends meet and 33 percent said they are not putting any money aside. In an economy that had a low savings rate to begin with, that is a bad sign indeed.
As long as household budgets are that tight, a recovery will be an iffy proposition, since consumer spending makes up 70 percent of GDP and most economists see a "jobless recovery" in months ahead. If those households pulling in salaries are barely making it, large numbers of unemployed will have to find jobs before consumer spending -- and the economy as a whole -- can improve.
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