KEY IDEA: Even though unemployment is at an all-time low fewer than half (46%) of those who were adults at the time of the recession say they’ve seen their paychecks grow since before it began. With Millennials strapped by student loan debt and increases in health insurance payments they, like a lot of other people, are hurting financially.
The median family income, after accounting for inflation, was $59,039 in 2016, little different than it was in 2000 ($58,544). During the same time, medical, childcare and college costs have ballooned.
The next economic slump, whenever it occurs, could be particularly damaging. Many Americans are still digging out from the recession. Even a modest downturn is going to cause further harm to Americans’ personal finances.
“The evidence continues to mount that the Trump-GOP tax cuts were a scam, a giant bait-and-switch that promised workers big pay raises, a lot more jobs and new investments, but they largely enriched CEOs and the already wealthy,” said Frank Clemente, executive director of Americans for Tax Fairness.
He noted only 4% of the US workforce saw any sort of pay increase or bonus from the tax cuts.
Credit Card Debt Means Trouble
In December 2017 America owed a total of $834 billion in credit card debt alone — a 7 percent rise from 2016. When other sources of revolving consumer credit are included Americans owe a total of $1.027 trillion as of March of 2018. The outstanding revolving consumer credit is growing at a staggering rate and has surpassed revolving credit owed during the 2008 Great Recession.
Eventually, consumers are going to have to pay that debt and that means less money for discretionary spending. No wonder the number aspect of trying new brands is price.
What Does This Mean For Marketers?
1ne: Brands are going to exceed consumer expectations and even if they rate high in that experience shoppers are willing to try new brands that offer a better value.
2wo: Millennials are hurting. Student loan debt is limiting their ability to splurge on vacations, cars and even housing.
3hree: Brands should have a strategic plan in place in case the economy enters a downturn.
4our: Some products, like a $200 heated razor, are going to have a problem finding an audience.
5ive: Brand should monitor competitors. Think like a consumer and ask “what are the tradeoffs of trying new brands”. For example, would a shopper spend more money on premium ice cream versus a trusted brand that meets their needs?”
I expect more retailers to shut their doors shortly and I also believe that if tariffs (taxes) continue along with higher healthcare costs, consumers will drastically cut back.
Continue to watch credit card debt, employer health insurance rates and average raises given to employees. The bill is going to come due.