The Destruction of the Middle Class: The Real Story Behind America’s Declining Economy

It’s probably no surprise to you that, these days, the middle class, the backbone of the nation, is struggling. “Gas for air,” ace Newsweek put it

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

“Middle class” is a rather vague concept – one definition is those whose income is 3 times the federal poverty line (currently $15,000), which includes nearly 2 out of every 3 Americans. They run the gamut from high school graduates to post-graduate degrees, and can work in blue- or white-collar jobs. They live in cities, suburbs and rural areas.

In fact, the only thing they have in common, apart from their income, is their difficulty making ends meet:

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

Here are some highlights from the survey 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 earning $75,000 a year spend more than 50% of their budget on housing
• Most of those earning under $60,000 a year find their debt ‘difficult to manage’

Being a middle class American these days just doesn’t deliver economic security.

Maybe that’s why so many people are fed up with hearing how the economy is booming?

You see, in a prosperous country, the success of the middle and upper classes should parallel each other. If the wealth of the upper class increases by 10%, then the wealth of the middle class should increase by about the same amount – spread over a much wider part of the population, it’s a smaller increase per breath, but represents a similar amount of wealth.

Unfortunately, this is not happening. And it hasn’t been for a long time.

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

The middle class has lagged behind on two main points.

Income growth for the middle class since 1970 has not kept pace with income growth for the upper income level.

And the share of total American household income held by the middle class has sunk.

So what’s going on?

Here’s what CNN blames:

America’s middle class is feeling the heat from 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, cutting back on their spending and seeking deals. The wealthiest Americans, who have helped prop up the economy’s strength through high interest rates, have also started winding down their purchases.

US home prices are at record levels. Americans are debt collection AND savings are running out accumulated during the height of the Covid-19 pandemic. Thousands of corporate layoffs there are some Americans struggling to make ends meet saying they feel like they are living in a recession.

Okay, two things are happening…

First, prices (especially for homes) have grown far beyond the capacity of most Americans to ever become homeowners. Late last year, we saw headlines like “Homes ‘unaffordable’ in 99% of country for average Americans.”

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

When prices for necessities rise, you have to pay them. Obviously, this causes a great deal of financial stress.

Secondlyhave made higher interest rates increasingly expensive debt. Especially variable rate debt (like credit cards and junk mortgages).

This presents us with a Catch-22…

The highest interest rates are from the Federal Reserve antidotal for higher prices.

Right now, middle-class Americans are being squeezed between 3.6% core CPI inflation (which is 80% above the Fed’s target) and an effective federal funds rate of 5.33%. (which is, as Phillip Patrick pointed out earlier this week, just a little higher the long-term average!)

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

Suffice it to say a growing economy and a will progress just one is not the same.

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

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

Any economy worth its salt can produce low-skilled, low-wage jobs. The ability of 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:

The latest data published by Vanguard shows demand for higher-income workers is decliningpainting a picture of a two-tiered labor market that has seen hiring boom for blue-collar workers and waning for white-collar workers.

Among the lowest earners — those earning less than $55,000 a year — the employment rate has remained above pre-pandemic levels, at 1.5%. But employment for those earning more than $96,000 has slowed in just 0.5%…

She scores the slowest rate of employment for high-income workers since 2014barring a major downturn during the pandemic.

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

The job market is stagnant, especially for white-collar workers. Employers are reluctant to let workers go and they are also in no rush to hire.

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

Here’s how challenging the middle-class job search can be in today’s job market:

A graphic designer told Axios that he has 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 freelancer salaries and fees on offer are much lower than a few years ago.

Ultimately: Not long ago, most professionals lived in a flea market paradise – not so much now.

When middle-class workers were able to easily “trade” an existing job for one new, higher paying jobthey were able to stay on top of ever-increasing expenses.

That time, alas, has passed… Now those who have jobs are truly grateful, even when their payment is less than the expenses.

And those without jobs are getting desperate.

Overall, we are in a very uncertain economic time:

• Inflation has gone over (sometimes much, much higher) the Fed’s 2% target away 39 consecutive months
• Average wages have risen but fallen very short of the higher cost of living
• The Fed’s interest rate hikes have reduced inflation and sent debt payments down flying
• Both middle class and the wealthiest Americans they are cutting costs

When you factor in anemic economic growth, you get the recipe for the second-worst economic scenario: Stagflation.

Trust me, a recession is here 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 even in the worst of circumstances…

Diversify and protect your savings with recession-proof assets

The threat of stagflation has reared its ugly head several times in recent years. So far, we’ve kind of messed up.

But if you’re not predicting a recession now (as in “before the end of the year”), then you’re wrong.

It is better to make some strategic financial moves now and not 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 provide resistance to inflation AND growth potential – along with the benefits of diversification. In short, physical gold and silver may be just what you need to put your savings on a solid foundation, no matter what happens next.

Additionally, if you’re one of the middle class Americans “gasping for air” financially, I’d love to hear more about your situation. Post a comment or contact us on Facebook.

_______________

Phillip Patrick is Birch Gold Group’s chief spokesperson and educator. He was born in London and received a degree in politics and international relations from the prestigious University of Redding in Berkshire, England. Growing up in London, he saw first-hand the dangers of overreaching government and socialist policies. He spent years as a private wealth manager at Citigroup on Lombard Street (London’s Wall Street). He joined Birch Gold Group as a precious metals specialist in 2012.