March 12 The Dow Jones industrial average is at an all-time high, the U.S. jobless rate has fallen to a four-year low and the housing market is seeing a recovery, but for many lower income and middle class Americans, the improving economy has yet to take hold.
Instead, they are anxious enough about higher gasoline prices and a payroll tax increase to slash their spending.
An online poll of 1,538 people conducted March 4-8 by Reuters/Ipsos found that two-thirds of adults say they are cutting their monthly spending and almost all of the rest say their spending is little changed (For a graphic with poll results, click here: link.reuters.com/hux56t)
The biggest reason given by those who said they are cutting spending - 72 percent of those polled - was increasing savings and paying off debts. The second biggest was higher gas prices, cited by 63 percent.
Of those cutting back specifically because of gas prices or tax increases, 81 percent said they are cutting down on meals at restaurants, 73 percent are reducing entertainment costs such as movies and concerts and 62 percent are spending less on travel and vacations.
At the same time, affluent consumers are showing signs of increased confidence, according to at least one recent survey. This bifurcation may play into concerns about income inequality and could add to pressure on President Barack Obama and Democrat lawmakers in Congress to resist any budget deficit cutting deal that reduces spending on the social safety net and doesn't include further taxes on the wealthy.
Some of those polled were willing to talk about why they were curbing spending.
Donna Gilbert doesn't even go all the way downstairs in her Webster, New Hampshire, house because it costs too much to heat. "We don't turn the heat on that much anymore. We use the wood stove ... We have plenty of trees, thank God. We've cut back on just about everything. We don't use the basement anymore," said Gilbert, 59, who is disabled and consolidates grocery shopping trips to save on gas money.
Another who indicated in the poll that he has to be very careful over what he spends is Bob Fell. Once a millionaire as a member of the family behind Chicago's Fell Co clothing stores, he's now bankrupt, driving a 10-year-old truck he can't afford to replace.
"Things got tougher and tougher, my business got almost impossible, all the small businesses were going out of business, credit was bad," said Fell, 75. "Now, we're playing catch-up. We're not going anywhere until we catch up a little bit. We're just starting to get our head above water."
It is not just luxuries that are being hit, though - 61 percent of those cutting spending said they would look to save money on clothes and shoes and 43 percent were planning on cutting spending at the grocery store too.
NOT ALL NEGATIVE
To be sure, people don't always do what they say in such surveys, which makes life difficult for economists. There are also positive signs.
Friday's jobless figures show that U.S. employers added 236,000 workers to their payrolls in February and the unemployment rate fell to 7.7 percent, the lowest since the financial crisis started to devastate the economy in December 2008.
U.S. stock prices, as measured by the Dow Jones industrial average, have gained 10 percent so far this year and are up 123 percent since the financial crisis-era low on March 9, 2009. The gains, together with a 7 percent recovery in housing prices in the past year, will tend to help those who own homes and those who have pension and mutual funds.
There is also a lot going on in the boom towns spawned by the rapid growth in domestic oil and gas production - places such as Williston, North Dakota, where 40 workers have been building the Dakota Landing hotel since October.
"I just think this boom is going to keep going," said Kim Hale, superintendent at the Dakota Landing site, who was himself out of work for more than three years. "I'm here until I get fired," he said.
But it is the affluent whose sentiment appears to be improving most, as the gains in asset prices offset the impact of January tax increases that targeted those with higher incomes. The February edition of the Mendelsohn Affluent Barometer, which surveys households making more than $100,000 a year, found 52 percent of the well-off thought they would be doing better a year from now, an increase of 11 percentage points in just two months.
Banfi Vintners is the kind of firm that is benefiting. It says it can't produce enough of its highest-end wine, which goes for $150 at restaurants. It is also fielding more requests to do tastings.
"We're seeing these types of (luxury) events picking up, whereas in years past they were a little more quiet," said Cristina Mariani-May, co-CEO of the winemaker. "Maybe those who had the money to spend weren't willing to spend on these types of events. Now they're selling out."
Further down the scale companies are just not seeing such confidence. Government data released last week showed 47.79 million Americans received food stamps in December. Three months into the fiscal year, the average number of recipients was up 1 million on the prior year and 3 million on two years ago.
CEOs say people are mostly still buying staple goods, but beyond that a worryingly large number are not buying even the smallest extras.
"People don't stop doing their laundry, you don't let the trash pile up, but they may not go out to dinner or a movie or they may not take the kids to McDonald's," said Don Knauss, chief executive of Clorox Co, in a recent interview.
CUTS ALL ALONG THE SPECTRUM
The ranks of low-income Americans has been growing, and the middle class shrinking as government and manufacturing jobs have declined since the financial crisis.
According to Nielsen's Homescan Panel, the number of U.S. households making less than $30,000 a year rose 9.7 percent from 2009 to 2012.
Carl R. Lebo had to give up his annual trip to baseball's spring training pre-season warm-up camps - a favorite trip for some baseball fans - in Florida and Arizona three years ago. He and his wife limit their dining out to the restaurant where she works and gets a discount. They live in Delaware, and see their families in Pennsylvania less often than they would like because of the cost to drive.
"We do enjoy going out," he said. "I certainly hope it's not going to be permanent. I hope there's going to be an upswing in the economy and that things are going to change for us.
"But right now there's no change. It's not as good as it used to be," Lebo said of the economy.
The economy expanded 2.2 percent last year, but forecasters are looking for growth of only 1.9 percent this year, largely because of tighter fiscal policy in Washington.
"My guess is that (the tax hike) is impacting the economy more than initially thought," said Tim Hopper, chief economist at the pension provider TIAA-CREF in New York.
CORPORATE AMERICA FEELS IT
For proof that the much of America is facing strains, one need only look at warnings from restaurant companies.
At least three national chains - Olive Garden parent Darden Restaurants Inc, IHOP parent DineEquity Inc and Chili's parent Brinker International Inc - have said they are seeing fewer customers, and those they do see are spending less per visit.
S&P 500 companies in the consumer discretionary sector are now expected to report first-quarter earnings growth of 8 percent, according to Thomson Reuters data - not bad, except that in early January analysts were forecasting growth of 13 percent and last October they expected 16 percent growth for the quarter.
If that 8 percent figure turns out to be right, it would be the weakest rate of earnings growth for the sector in at least six quarters.
Across income categories, the latest Thomson Reuters/University of Michigan consumer sentiment index actually rose 4 points in February, as people grew more optimistic over the jobs picture.
But try telling that to someone like Lawrence Beliz, 68, of Escondido, California, whose wife is unemployed and looking for work.
They have had to cut their restaurant spending in half, when they can even afford to go, and the next step is to cut back on driving to save money in California's expensive gas market.
Ask Beliz if he expects the economy to improve, and you'll get an answer that sums up the deep-seated pessimism that is still pervasive.
"Not at all," he says. "I expect it to collapse completely." (Reporting By Martinne Geller, Dhanya Skariachan and Phil Wahba in New York, Lucia Mutikani in Washington and Lisa Baertlein in Los Angeles; Writing by Ben Berkowitz; Editing by Martin Howell and Claudia Parsons)
Our top photos from the last 24 hours.