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Middle Class Destruction: The Real Story Behind America's Declining Economy

Middle Class Destruction: The Real Story Behind America's Declining Economy
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BY ZeroHedge - TYLER DURDEN - JUN 13, 2024 - 08:45 AM

Authored by Peter Reagan via Birch Gold Group,

The economic hardships of millions of middle-class Americans are going unseen by their government. They feel left behind, unable to relate to testaments of a better economic forecast, and many doubt they will ever find a way out of their financial struggles.

It probably comes as no surprise to you that, these days, the middle class, the backbone of the nation, are struggling. “Gasping for air,” as Newsweek puts it.

Here’s the original press release from the National True Cost of Living Coalition.

The “middle class” is a rather vague concept – one definition is those whose incomes are 3x the federal poverty line (currently $15,000), which encompasses nearly 2 in every 3 Americans. They span the spectrum, from high school graduates to post-graduate degrees, and may work in blue- or white-collar jobs. They live in cities, the suburbs and in rural areas.


THE MIDDLE CLASS IS ABOUT TO BE WIPED OUT...(video)


In fact, just about the only thing they have in common, other than their incomes, is their difficulty making ends meet:

…the economic hardships of millions of middle-class Americans are going unseen by their government. They feel left behind, unable to relate to testaments of a better economic forecast, and many doubt they will ever find a way out of their financial struggles.

Here are a few highlights from the poll results:

  • 40% of ALL Americans are unable to plan beyond their next paycheck
  • 46% don’t have $500 saved for a rainy day
  • A quarter of those making $75,000 per year spend over 50% of their budget on housing
  • The majority of those making under $60,000 per year find their debt “difficult to manage”

Being a middle-class American these days simply doesn’t offer economic security.

Maybe this is why so many people are fed up with hearing about how the economy is booming?

See, in a prosperous country, the success of the middle and upper classes should parallel each other. If upper class wealth grows 10%, then middle class wealth should grow approximately the same amount – distributed across a much wider portion of the population, it’s a smaller increase per capita, but represents a similar amount of wealth.

Unfortunately, this isn’t happening. And it hasn’t been for quite some time.

In fact, according to a Pew Research study from May:

The middle class has fallen behind on two key counts.

The growth in income for the middle class since 1970 has not kept pace with the growth in income for the upper-income tier.

And the share of total U.S. household income held by the middle class has plunged.

So what’s going on?

Here’s what CNN blames:

America’s middle class is feeling the heat from sky-high interest rates and persistent inflation.

Economic data and corporate earnings reports have shown that lower-income consumers are struggling to pay their bills on time, reducing their spending and searching for deals. Wealthier Americans, who have helped support the economy’s strength through high interest rates, are also starting to reel in their purchases.

U.S. home prices are at record highs. Americans are racking up debt and running low on savings accumulated during the height of the Covid-19 pandemic. Thousands of corporate layoffs have some Americans struggling to make ends meet saying they feel as though they are living in a recession.

Okay, so there are two things going on…

Firstprices (especially for homes) have risen well beyond the capacity of the majority of Americans to ever become homeowners. Late last year, we saw headlines like “Homes ‘unaffordable’ in 99% of nation for average American.”

But it’s not just homes – it’s also rent, gas, food, energy, car insurance, childcare (you know, the necessities) that cost 15%-40% more today than they did three short years ago. We’ve discussed this quite often and in great detail.

When prices on necessities go up, you have to pay them. Obviously that causes a massive amount of financial stress.

Second, higher interest rates have made debt increasingly expensive. Especially floating-rate debt (like credit cards and unadvisable mortgages).

This presents us with a Catch-22…

Higher interest rates are the Federal Reserve’s antidote for higher prices.

Right now, middle-class Americans are being squeezed between 3.6% core CPI inflation (that’s 80% over the Fed’s target) and a 5.33% Effective Federal Funds Rate. (Which is, as Phillip Patrick pointed out earlier this week, only barely above the long-term average!)

Now, CNN tried to make the case that the “economy is booming.” But I’ve explained the difference between GDP and real economic growth before.

Suffice to say a growing economy and a prosperous one just aren’t the same thing.

And the shrinking supply of good jobs is a perfect example of the difference…

A good job is hard to find (and getting harder)

Any economy worth its salt can produce low-skill, low-wage jobs. The ability for the middle class to find work is what generally separates the wheat from the chaff, at least in first world countries like the United States.

But according to a number of different reports, the middle class job market is sluggish at best:

Recent data published by Vanguard shows demand for higher-income employees is waning, painting a picture of a two-tier job market that has seen hiring flourish for blue-collar workers and languish for white-collar workers.

Among the lowest-income earners – those making less than $55,000 annually – the hiring rate has remained above pre-pandemic levels, at 1.5%. But hiring for those who earn more than $96,000 has slowed to just 0.5%…

It marks the slowest hiring rate for high-income workers since 2014, excluding a major drop during the pandemic.

In other words, the job market is stagnating overall. It’s getting tougher and tougher to find a good job:

The labor market is stagnating, particularly for white-collar workers. Employers are reluctant to let workers go and they also aren’t in a hurry to hire.

“The stagnant job market is driving people crazy,” said Phoebe Gavin, a career coach in media, entertainment, and tech.

Here’s just how challenging the job hunt can be for the middle class in the current employment market:

A graphic designer told Axios he’s been looking for a new role for eight months. There are so many hoops to jump through in the interview process, he says. And the salaries and freelance rates on offer are far lower than a few years ago.

The bottom line: Not too long ago, most professionals were living in a job hoppers paradise – now not so much.

When middle-class workers were able to easily “trade up” an existing job for a new, higher-paying job, they were able to stay on top of persistently rising expenses.

That time, sadly, has passed… Now those who do have jobs are truly grateful, even when their pay falls short of expenses.

And those who don’t have jobs are getting desperate.

Overall, we’re at a very precarious economic time:

  • Inflation has run above (sometimes far, far above) the Fed’s 2% target for 39 consecutive months
  • Average paychecks have risen, but fallen far short of the higher cost of living
  • The Fed’s interest rate hikes have pushed inflation down, and sent debt payments soaring
  • Both middle-class and wealthier Americans are cutting back on spending

When you consider anemic economic growth as well, you get the recipe for the second-worst economic scenario: Stagflation.

Trust me, a recession is good news when the other choice is another “lost decade” of persistent inflation, low-to-negative economic growth and high unemployment.

That means it’s time to make sure your savings are diversified enough to thrive in even the worst circumstances…

Diversify and protect your savings with recession-resistant assets

The threat of stagflation has reared its ugly head a couple of times during the last few years. So far, we’ve somehow muddled through.

But if you aren’t anticipating a recession right now (as in “before the end of the year”), then your head isn’t on straight.

It’s best to make any strategic financial moves now, rather than later.

I’ve said it before and I’ll say it again: The best time to buy gold is before the next crisis.

Right now, you have options. Take a moment to learn about the benefits of owning physical precious metals like gold and silver. They offer inflation resistance and growth potential – along with diversification benefits. In short, physical gold and silver may be exactly what you need to put your savings on a firm foundation, regardless of what happens next.

*  *  *

With global instability increasing and election uncertainties on the horizon, protecting your retirement savings is more important than ever. And this is why you should consider diversifying into a physical gold IRA. Because they offer an easy and tax-deferred way to safeguard your savings using tangible assets. To learn more, click here to get your FREE info kit on Gold IRAs from Birch Gold Group.


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