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American Living Standards on the Decline

American Living Standards on the Decline

May 29, 2024

American Living Standards on the Decline

Despite the narrative of economic growth and a strong labor market, there's a stark contrast between the fortunes of the financial markets and the reality of everyday Americans.

According to the Boston Federal Reserve, a key indicator of living standards is the average real GDP per capita. While this has risen since 2008, it has deviated from the historical trend, with the first quarter of 2024 seeing real GDP per capita at only 85.4% of the long-term trend. Income and employment trends suggest a shortfall of jobs and earnings against historical expectations, with a $4.1 trillion lag in real personal income as of early 2024.

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The labor market also presents a concerning picture. Official data may paint an optimistic scenario, but deeper analysis reveals substantial job shortfalls. The social and economic consequences of these trends are visible in the rising drug overdose deaths and declining birth rates, hinting at a populace under increasing strain.

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Parallel to these findings, a Lendingtree report has discovered that 78% of Americans now regard fast food as a luxury. With the cost of a Big Mac doubling and other items seeing up to 200% price increases, families are forced to reconsider their consumption habits. This shift is affecting not only low-income groups but also those with higher incomes.

The fast food industry, a significant employer with about 14 million workers in the U.S., could face a downturn if the trend persists. The Federal Reserve's data shows a 41% increase in fast food prices, but actual menu prices suggest a rise closer to 55%.

Adding to the this alarming trend, MarketWatch reports that fast food is now considered the new "status symbol." With prices up 31% post-pandemic, the convenience once taken for granted is now a luxury for many. A survey by Drive Research shows that 78% of high-income respondents are frequent fast food patrons, compared to 43% of those with lower incomes.

Rising prices have led to a shift in consumer behavior, with the affluent increasingly opting for fast food over more expensive dining options. However, the luxury label attached to fast food is a double-edged sword, reflecting the economic pressures faced by lower-income families.

While financial indicators and market performance suggest economic strength, the lived experience of many Americans tells a different story. Rising costs and stagnant wages are reshaping perceptions of affordability and luxury. The future implications of these trends could have significant repercussions for consumer behavior, the labor market, and the overall economy. The divergence between the prosperity of financial assets and the decline in real living standards raises concerns about the sustainability of current economic policies.

MarketWatch Article


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