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http://finance.yahoo.com/news/middle-class-steadily-eroding-just-013117051.html


The Middle Class Is Steadily Eroding. Just Ask the Business World.
The New York Times
By NELSON D. SCHWARTZ 1 hour ago

In Manhattan, the upscale clothing retailer Barneys will replace the bankrupt discounter Loehmann’s, whose Chelsea store closes in a few weeks. Across the country, Olive Garden and Red Lobster restaurants are struggling, while fine-dining chains like Capital Grille are thriving. And at General Electric, the increase in demand for high-end dishwashers and refrigerators dwarfs sales growth of mass-market models.

As politicians and pundits in Washington continue to spar over whether economic inequality is in fact deepening, in corporate America there really is no debate at all. The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away.

If there is any doubt, the speed at which companies are adapting to the new consumer landscape serves as very convincing evidence. Within top consulting firms and among Wall Street analysts, the shift is being described with a frankness more often associated with left-wing academics than business experts.

“Those consumers who have capital like real estate and stocks and are in the top 20 percent are feeling pretty good,” said John G. Maxwell, head of the global retail and consumer practice at PricewaterhouseCoopers.

In response to the upward shift in spending, PricewaterhouseCoopers clients like big stores and restaurants are chasing richer customers with a wider offering of high-end goods and services, or focusing on rock-bottom prices to attract the expanding ranks of penny-pinching consumers.

“As a retailer or restaurant chain, if you’re not at the really high level or the low level, that’s a tough place to be,” Mr. Maxwell said. “You don’t want to be stuck in the middle.”

Although data on consumption is less readily available than figures that show a comparable split in income gains, new research by the economists Steven Fazzari, of Washington University in St. Louis, and Barry Cynamon, of the Federal Reserve Bank of St. Louis, backs up what is already apparent in the marketplace.

In 2012, the top 5 percent of earners were responsible for 38 percent of domestic consumption, up from 28 percent in 1995, the researchers found.

Even more striking, the current recovery has been driven almost entirely by the upper crust, according to Mr. Fazzari and Mr. Cynamon. Since 2009, the year the recession ended, inflation-adjusted spending by this top echelon has risen 17 percent, compared with just 1 percent among the bottom 95 percent.


More broadly, about 90 percent of the overall increase in inflation-adjusted consumption between 2009 and 2012 was generated by the top 20 percent of households in terms of income, according to the study, which was sponsored by the Institute for New Economic Thinking, a research group in New York.

The effects of this phenomenon are now rippling through one sector after another in the American economy, from retailers and restaurants to hotels, casinos and even appliance makers.

For example, luxury gambling properties like Wynn and the Venetian in Las Vegas are booming, drawing in more high rollers than regional casinos in Atlantic City, upstate New York and Connecticut, which attract a less affluent clientele who are not betting as much, said Steven Kent, an analyst at Goldman Sachs.

Among hotels, revenue per room in the high-end category, which includes brands like the Four Seasons and St. Regis, grew 7.5 percent in 2013, compared with a 4.1 percent gain for midscale properties like Best Western, according to Smith Travel Research.

While spending among the most affluent consumers has managed to propel the economy forward, the sharpening divide is worrying, Mr. Fazzari said.

“It’s going to be hard to maintain strong economic growth with such a large proportion of the population falling behind,” he said. “We might be able to muddle along — but can we really recover?”

Mr. Fazzari also said that depending on a relatively small but affluent slice of the population to drive demand makes the economy more volatile, because this group does more discretionary spending that can rise and fall with the stock market, or track seesawing housing prices. The run-up on Wall Street in recent years has only heightened these trends, said Guy Berger, an economist at RBS, who estimates that 50 percent of Americans have no effective participation in the surging stock market, even counting retirement accounts.

Regardless, affluent shoppers like Mitchell Goldberg, an independent investment manager in Dix Hills, N.Y., say the rising stock market has encouraged people to open their wallets and purses more.


“Opulence isn’t back, but we’re spending a little more comfortably,” Mr. Goldberg said. He recently replaced his old Nike golf clubs with Callaway drivers and Adams irons, bought a Samsung tablet for work and traded in his minivan for a sport utility vehicle.

And while the superrich garner much of the attention, most companies are building their business strategies around a broader slice of affluent consumers.

At G.E. Appliances, for example, the fastest-growing brand is the Café line, which is aimed at the top quarter of the market, with refrigerators typically retailing for $1,700 to $3,000.

“This is a person who is willing to pay for features, like a double-oven range or a refrigerator with hot water,” said Brian McWaters, a general manager in G.E.’s Appliance division.

At street level, the divide is even more stark.

Sears and J. C. Penney, retailers whose wares are aimed squarely at middle-class Americans, are both in dire straits. Last month, Sears said it would shutter its flagship store on State Street in downtown Chicago, and J. C. Penney announced the closings of 33 stores and 2,000 layoffs.

Loehmann’s, where generations of middle-class shoppers hunted for marked-down designer labels in the famed Back Room, is now being liquidated after three trips to bankruptcy court since 1999.

The Loehmann’s store in Chelsea, like all 39 Loehmann’s outlets nationwide, will go dark as soon as the last items sell. Barneys New York, which started in the same location in 1923 before moving to a more luxurious spot on Madison Avenue two decades ago, plans to reopen a store on the site in 2017.

Investors have taken notice of the shrinking middle. Shares of Sears and J. C. Penney have fallen more than 50 percent since the end of 2009, even as upper-end stores like Nordstrom and bargain-basement chains like Dollar Tree and Family Dollar Stores have more than doubled in value over the same period.

Competition from online giants like Amazon has only added to the problems faced by old-line retailers, of course. But changes in the restaurant business show that the effects of rising inequality are widespread.

A shift at Darden, which calls itself the world’s largest full-service restaurant owner, encapsulates the trend. Foot traffic at midtier, casual dining properties like Red Lobster and Olive Garden has dropped in every quarter but one since 2005, according to John Glass, a restaurant industry analyst at Morgan Stanley.

With diners paying an average tab of $16.50 a person at Olive Garden, Mr. Glass said, “The customers are middle class. They’re not rich. They’re not poor.” With income growth stagnant and prices for necessities like health care and education on the rise, he said, “They are cutting back.” On the other hand, at the Capital Grille, an upscale Darden chain where the average check per person is about $71, spending is up by an average of 5 percent annually over the last three years.

LongHorn Steakhouse, another Darden chain, has been reworked to target a slightly more affluent crowd than Olive Garden, with décor intended to evoke a cattleman’s ranch instead of an Old West theme.

Now, hedge fund investors are pressuring Darden’s management to break up the company and spin out the more upscale properties into a separate entity.

“A separation could make sense from a strategic perspective,” Mr. Glass said. “Generally, the specialty restaurant group is more attractive demographically.”

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Offline olde north church

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #1 on: February 03, 2014, 01:31:08 PM »
The stock drops of late '07 through early '09 was the big boys chasing the little ones off the playground.  Once the hunt and peckers were gone, the water was fine and their was money to be made.
The blue hairs with butter and egg money and the bowling alley boys in Indiannapolis were small fry with big impact.
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Offline Rapunzel

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #2 on: February 03, 2014, 09:22:21 PM »
Interesting discussion about this on Real News.   They pointed out when we gave "permanent" trade status to China to manufacture everything the die was cast. They pointed out in the past we would never give "permanent" status and all trade agreements were reassessed from the POV of whether they were harming our economy.   Some used the excuse the cheaper goods would be good for the middle class while ignoring the middle class can't afford squat when all their jobs are gone.. but worse is our money going to China is being used by China to build up a huge military presence around the world...... we have shot ourselves in the foot with one fell swoop -  killing the middle class and giving our enemies the money to destroy us.
“The time is now near at hand which must probably determine, whether Americans are to be, Freemen, or Slaves.” G Washington July 2, 1776

Offline massadvj

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #3 on: February 03, 2014, 09:36:00 PM »
The shrinking middle class has been with us since the late 1980's.  It is exacerbated by the socialistic policies of late, but its root cause is not political.  The root cause is globalization and technology.  Those who have understood and embraced globalization and technology have been upwardly mobile, and those who have not have been downwardly mobile.  Globalization and technology are big enough tides to raise all boats, but government has to get out of the way for that to happen. 
"She only coughs when she lies."

Offline Rapunzel

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #4 on: February 03, 2014, 10:05:47 PM »
The shrinking middle class has been with us since the late 1980's.  It is exacerbated by the socialistic policies of late, but its root cause is not political.  The root cause is globalization and technology.  Those who have understood and embraced globalization and technology have been upwardly mobile, and those who have not have been downwardly mobile.  Globalization and technology are big enough tides to raise all boats, but government has to get out of the way for that to happen.


But government is making it worse.  At the very least instead of giving 99 weeks unemployment cart-blanc it should come with strings  - aka re-education and proof you are trying to get reeducated... drop out of school the benefits stop... flunk out  - the benefits stop.   
“The time is now near at hand which must probably determine, whether Americans are to be, Freemen, or Slaves.” G Washington July 2, 1776

Offline Oceander

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #5 on: February 03, 2014, 11:54:17 PM »
The problem is, the growing difference in income - I hate the term "income inequality" because it implies a very false assumption: that everyone should have the same amount of income - is the result of government interference.

Offline olde north church

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #6 on: February 04, 2014, 07:01:31 AM »
The problem is, the growing difference in income - I hate the term "income inequality" because it implies a very false assumption: that everyone should have the same amount of income - is the result of government interference.

Similar to the term "underprivileged".  It would indicate that people who drag their ass out of bed every morning and take a risk, whether putting capital or shoulder to wheel, nose to grindstone  injuries have some level of privelege.
Why?  Well, because I'm a bastard, that's why.

Offline Oceander

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #7 on: February 06, 2014, 12:35:39 PM »
Similar to the term "underprivileged".  It would indicate that people who drag their ass out of bed every morning and take a risk, whether putting capital or shoulder to wheel, nose to grindstone  injuries have some level of privelege.

very true; I hadn't thought of that.  It also dovetails quite nicely with the basic democrat/liberal view of wealth - that those who have it got it solely because of the government and therefore the government can willy-nilly strip them of their wealth because it really isn't theirs.  In other words, someone with some wealth has that wealth solely as a privilege granted him/her by the government, and not because of anything that individual might have done.

Offline olde north church

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #8 on: February 06, 2014, 01:16:13 PM »
very true; I hadn't thought of that.  It also dovetails quite nicely with the basic democrat/liberal view of wealth - that those who have it got it solely because of the government and therefore the government can willy-nilly strip them of their wealth because it really isn't theirs.  In other words, someone with some wealth has that wealth solely as a privilege granted him/her by the government, and not because of anything that individual might have done.

I remember my profession from "The Psychology of Death and Dying" was twaddling about regarding passing on of weatlth from generation to generation.  My first thought, boy these people who claim to care nothing about wealth sure as f*ck give a damn about how to move it.
Why?  Well, because I'm a bastard, that's why.

Offline Oceander

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #9 on: February 06, 2014, 01:43:26 PM »
I remember my profession from "The Psychology of Death and Dying" was twaddling about regarding passing on of weatlth from generation to generation.  My first thought, boy these people who claim to care nothing about wealth sure as f*ck give a damn about how to move it.

Indeed.  Anecdotally, I found it rather telling that the liberal family that owns the controlling stock of the NYT engaged in some patently obvious tax planning - planning that necessitated the use of aggressive estimates of FMV and discounts for lack of marketability - a few years ago with the obvious intent of preserving as much as possible to pass on to the younger generation.  All while one of the stalking horses of liberals is the unfairness of inherited wealth.

Offline LambChop

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #10 on: February 06, 2014, 02:04:32 PM »

But government is making it worse.  At the very least instead of giving 99 weeks unemployment cart-blanc it should come with strings  - aka re-education and proof you are trying to get reeducated... drop out of school the benefits stop... flunk out  - the benefits stop.

 :amen:

Some of the most successful drivers I hired came from the state's unemployment office.  These were mature men who found themselves out of a job and no prospects on the horizon.  The state paid for their truck driving school and worked with them for placement once they got their CDL.

They found a new career path, the state saved months (or years even) in benefits paid.  win-win

Offline Rapunzel

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #11 on: February 06, 2014, 05:34:28 PM »
:amen:

Some of the most successful drivers I hired came from the state's unemployment office.  These were mature men who found themselves out of a job and no prospects on the horizon.  The state paid for their truck driving school and worked with them for placement once they got their CDL.

They found a new career path, the state saved months (or years even) in benefits paid.  win-win

I have absolutely no problem with funding a person while they go to school to learn a new trade. What I take issue with are the people who like to stand on street corners, shoot the breeze, drink, smoke, get tattoos, drive expensive cars and earn money under the table while we send them food stamps, pay for section-8 housing, aid for dependent children, and welfare for mommy and daddy and all the while they are doing nothing to get off the dole and make something of their life. 
“The time is now near at hand which must probably determine, whether Americans are to be, Freemen, or Slaves.” G Washington July 2, 1776

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #12 on: February 06, 2014, 05:45:47 PM »
I have absolutely no problem with funding a person while they go to school to learn a new trade. What I take issue with are the people who like to stand on street corners, shoot the breeze, drink, smoke, get tattoos, drive expensive cars and earn money under the table while we send them food stamps, pay for section-8 housing, aid for dependent children, and welfare for mommy and daddy and all the while they are doing nothing to get off the dole and make something of their life.

Exactly the same - with one small proviso (different country, different rules).

That bolded bit? If we'd tried to reject it, Child Services would have been on our doorstep faster than you can say Jack Robinson. Neither of us ever wanted to be on the Government teat. We have never taken anything - not income support, not unemployment, not disability. Heck - I don't even take my forces pension yet. But refusing child benefit? - you get no knock visits and lose your kids.
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Offline Rapunzel

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #13 on: February 06, 2014, 05:50:26 PM »
Then that is the difference between the UK and America. Frankly don't have kids until you can afford to support them.
“The time is now near at hand which must probably determine, whether Americans are to be, Freemen, or Slaves.” G Washington July 2, 1776

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #14 on: February 06, 2014, 05:55:24 PM »
Then that is the difference between the UK and America. Frankly don't have kids until you can afford to support them.

I don't like it one bit. With our youngest, we get visits roughly once a week (we are a little old to be new parents)! But - if you wait til you can afford to have kids, you will wait forever. You make yourself afford them! :laugh:

The fastest way to a man's heart? Inch to the right of the breastbone, between the fourth and fifth rib.

Every time I start to feel boring, I remember there is a monthly magazine devoted to elevators.

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Offline Rapunzel

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #15 on: February 06, 2014, 06:01:09 PM »
I don't like it one bit. With our youngest, we get visits roughly once a week (we are a little old to be new parents)! But - if you wait til you can afford to have kids, you will wait forever. You make yourself afford them! :laugh:

There is no way in Hell I'd put up with weekly visits from anyone from the Guv.
“The time is now near at hand which must probably determine, whether Americans are to be, Freemen, or Slaves.” G Washington July 2, 1776

Offline Oceander

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #16 on: February 06, 2014, 06:20:27 PM »
like the proverbial frog in the slowly-heated pot of water, people will put up with a lot more than they imagine themselves putting up with if the new impositions are smoothly put into place a few individuals at a time.

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #17 on: February 06, 2014, 06:26:16 PM »
There is no way in Hell I'd put up with weekly visits from anyone from the Guv.

You'll wind up with it, the way you are heading with Obamacare.

You know the thing about "Your kids belong to us all?" That wasn't hyperbole. That is socialist policy.

We have never considered our kids as "ours." We were and are simply lucky enough to have them for a time before they head out on their own. So it is immensely insulting to have some social worker drop by once a week or so to check.

When Mark was little, we refused entry. Nothing sinister, the water pipe main valve into the house had decided enough was enough and I was doing a tricky bit of plumbing by candle light. You don't want electricity flowing while there is an inch of water on the floor! She came back 20 minutes later with 2 police officers.
The fastest way to a man's heart? Inch to the right of the breastbone, between the fourth and fifth rib.

Every time I start to feel boring, I remember there is a monthly magazine devoted to elevators.

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Offline Rapunzel

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #18 on: February 06, 2014, 06:28:45 PM »
You accept it because you live in a socialist country. I do not and will not accept it.
“The time is now near at hand which must probably determine, whether Americans are to be, Freemen, or Slaves.” G Washington July 2, 1776

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #19 on: February 06, 2014, 06:35:05 PM »
You accept it because you live in a socialist country. I do not and will not accept it.

Then learn from us. Please?

What NOT to do is a more valuable example sometimes.
« Last Edit: February 06, 2014, 06:35:53 PM by EC »
The fastest way to a man's heart? Inch to the right of the breastbone, between the fourth and fifth rib.

Every time I start to feel boring, I remember there is a monthly magazine devoted to elevators.

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Offline Rapunzel

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #20 on: February 06, 2014, 06:37:56 PM »
Then learn from us. Please?

Why do you think I'm fighting so hard against OCare, and all the other liberal crap coming from both parties.  My ancestors came here in the 1600's and fought in the Revolution, the war between the states, WWI and WWII, my husband was in the military in the run up to Vietnam....... I think what is wrong with this country is too few think they should serve and don't... I think they would fight a lot harder to keep their country if they had instead of being so damned caviler about just giving it away to the illegals, for example.
“The time is now near at hand which must probably determine, whether Americans are to be, Freemen, or Slaves.” G Washington July 2, 1776

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Re: The Middle Class Is Steadily Eroding. Just Ask the Business World.
« Reply #21 on: February 06, 2014, 06:55:14 PM »
Keep fighting.

I love you Rap. But I need hit bed. Carry on tomorrow?
The fastest way to a man's heart? Inch to the right of the breastbone, between the fourth and fifth rib.

Every time I start to feel boring, I remember there is a monthly magazine devoted to elevators.

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I've got a website now: Smoke and Ink


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