Cash poor, time rich US consumers cause retail sales to plateau

Consumer demand


US Jobs Oct15a

US retail sales have failed to see the rise that most economists, and the US Federal Reserve, confidently forecast at the beginning of the year.  The theory was that lower oil prices would stimulate discretionary spending, and ensure that the long-promised economic recovery finally arrived.

But September sales were up just 0.1% versus August, and even this small amount was only due to a 1.8% increase in auto sales.   Excluding autos and gasoline, sales were flat versus January:

  • Consumers are now increasingly focused on price and convenience
  • They are “time rich and cash poor”, the opposite of the boom years when they were “cash rich and time poor”
  • Thus Wal-Mart, the US’s largest retailer, has just forecast a 12% fall in profits next year

Wal-mart’s news is confirmation, if confirmation were needed, that the formerly profitable middle ground of value-added products is fast disappearing.  Affordability is the key driver for future success.

So what has gone wrong?

The key issue is policymakers’ refusal to confront the issue of the ageing society, as they worry they will lose votes. They prefer to pretend that low interest rates can somehow restore full employment, and to ignore the structural change in the US population:

  • People no longer mostly die before retirement
  • Instead today, a 65-year old man can expect to live to 84.3 years on average, and a woman to 86.6.

As a result the participation rate in the US jobs market (the percentage of people actually in a job) is in long-term decline.  It peaked at 68.1% in 1997, compared to just 62.3% today:

  • It has been in long-term decline since World War II for men, due to increasing life expectancy –
  • Life expectancy was just 60.8 for men in 1940, meaning that most people could expect to die before retirement.
  • There were only 9m Americans aged 65 or older
  • The rate for women has also fallen back to 56.3% today  from its 60% peak in 1999
  • This has reversed the decades-long increase due to Equal Opportunity movements, which allowed women to stay in the workforce after marriage
  • One likely reason for this is the lack of support for working parents, which has helped to push US participation rate for women below that for Japan.  As the Financial Times notes, “A quarter of all women return to work less than 2 weeks after having a child

US earnings Oct15
The second chart (showing median US earnings in constant dollars of 1982-4), highlights another reason for households now being increasingly “time rich and cash poor”:

  • Average earnings today are actually lower at $337/week than in 2009, when they were $345/week
  • Average earnings for men have fallen from $402/week in 1979 to $373/week today, and are back at 2003 levels
  • Average earnings for women have continued to increase relative to men, but are still at only $305/week today

Clearly therefore, the situation today is quite different from 1985, when oil prices last halved (from around $65/bbl in $2015).  Then, more and more BabyBoomers were entering the workforce and more and more women were working – and earning higher wages.  This created a SuperCycle of demand for the economy, which saw personal consumption expenditure soar 45% in real terms by 1998, according to Census Bureau data.

But now we are set to see the reverse of this process, as the Bureau of Labor Statistics has noted:

“Slower GDP growth (will) become the “new normal.” In addition to the recession’s impact on potential growth, the economy faces a number of hurdles. As the nation’s demographic shift continues, with the baby-boom generation moving into retirement, the labor force participation rate will continue to decline, moderating growth.”


The "China Chill" slows global economy and petrochemicals


There were record numbers at last week’s European Petrochemical Associatio...

Learn more

Deflation returns to the major economies as stimulus fails, again


Next week, I will publish my annual Budget Outlook, covering the 2016-2018 peri...

Learn more
More posts
The Top 5 pandemic paradigm shifts

The Covid-19 pandemic has accelerated the fundamental changes which were already underway in global ...

Hertz goes bankrupt as non-essential consumer demand disappears

The US Federal Reserve has now spent $7tn bailing out Wall Street. But it couldn’t save the 10...

Smartphone sales head into decline as affordability becomes key

The smartphone sales decline accelerated in Q1, as Strategy Analytics report: “Global smartpho...

China’s plastic ban and recycling launch marks end of ‘business as usual’ for plastics industry

Paradigm shifts start slowly at first, and it is easy to miss them. But then one day, they suddenly ...

Automakers face stiff headwinds in big emerging markets

Brazil, Russia, India and China disappoint as manufacturers face investment demands of EVs © Bloomb...

Portugal shows the way to climate neutrality by 2050

“If you don’t know where you are going, any road will do”. The Irish proverb’...

The next billion phone users will be buying $10 smart feature phones, not $1000 iPhones

Smartphone sales plateaued in Q3, down 9% since Q3 2017’s peak of 1.55bn, as the chart shows....

Companies ignore the Perennials 55+ generation at their peril

Nearly a third of the the world’s High Income population are now in the Perennials 55+ generat...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more