The cost of hand-to-mouth living

Before 2007, this executive said, consumer spending on food and drink was fairly stable during the month in most US cities. But since 2007, spending patterns have become extremely volatile. More and more consumers appear to be living hand-to-mouth, buying goods only when their pay checks, food stamps or benefit money arrive. And this change has not simply occurred in the poorest areas: even middle-class districts are prone to these swings. Hence the need to study local pay and benefit cycles.

``"We see a pronounced difference between how people are shopping today and before the recession," the executive explained. "Consumers are living pay check by pay check, and they tend to spend accordingly. Then you have 50 million people on food stamps and that has cycles too. So for our business it has become critical to understand the cycle -- when pay [and benefit] checks are arriving."

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this story is not unique. Executives at Walmart, for example, have recently noted the rising impact of the "pay check cycle"; Kroger, another retailer, notes that the proportion of customers using food stamps has doubled, creating additional swings. And as these anecdotal tales mount up, they are interesting for at least two reasons. First, and most obviously, they should remind us of the silent, dark underbelly of economic pain that is stalking America's current "recovery". Most notably, it seems that the financial fragility of the poorer section of US society has risen sharply in recent years, as unemployment remains high and real incomes and household wealth fall. (A revealing survey published last week, for example, suggested that the wealth of Hispanic and black families declined by 44 per cent and 31 per cent respectively between 2007 and 2010.)

Measuring this financial fragility -- like measuring micro-level spending swings -- is tough, since it is not an issue that economists have traditionally tracked. But one in seven Americans (about 50 million) are now thought to be living in poverty and a similar number in "food insecure" households. Meanwhile, six million are using food banks and 47 million are on food stamps. And when the Brookings Institution tried to look at this fragility issue a couple of years ago, by analysing how many households could find $2,000 in a hurry, it concluded that a quarter of families had no access to ready, rainy-day funds. "Although financial fragility is more severe among low-income households, a sizeable fraction of seemingly middle-class Americans are also at risk," the study concluded.