How the Economy Looks to You




Americans are optimistic and resilient by nature. We're upbeat about our personal prospects despite our anxiety about the current economy. Almost two-thirds of respondents to a national survey say they're hopeful about what 2008 has in store for them, even though a majority of them, like many experts, believe we are already in the midst of a recession.



Wages Are Down

It's tough out there: Hiring has slowed, unemployment is rising, and most salaries haven't kept pace with the cost of basics such as groceries, gasoline and health care.

The U.S. is losing jobs for the first time since 2004. February's loss of 101,000 jobs was the biggest drop in five years and the third monthly loss in a row.

Both high-end and low-end retailers are reporting slower sales, a sign that consumers at every income level are tightening their belts. As demand falls, many employers have cut their workers' hours. The Labor Department says more than 600,000 people now work part-time because they can't find full-time work. A growing number of Americans have been out of work for more than six months. The unemployment rate is expected to rise from 4.8% to 5.5% this year -- and experts say it would be even higher if so many people hadn't given up looking for work.



The nation's median salary last year was $36,140 (half of all workers made more, half made less). After inflation, that's almost 0.5% below the 2006 median salary. The average 2007 pay increase was less than 4%, and many Americans got smaller raises or none. Meanwhile, the Consumer Price Index rose 4.3%. We now spend almost 5% more for food, 8.6% more for hospital services and a whopping 35% more for gasoline than we did a year ago.

Health Costs Soar

Health-care costs also are on the rise. Americans whose jobs provide health insurance paid about 11% more for it last year and probably will pay an additional 10% in 2008. Coverage is even more expensive for independent contractors. "I pay about 25% of my monthly income for health insurance for my daughter and myself -- by far the least-expensive policy I found," says Michele Elder, 44, a freelance talent manager in Portland, Ore. Still, Elder feels lucky to have it. Indeed, 76% of Americans who are insured told a recent survey they'd rather have $7500 of health benefits at work than a $7500 raise.

Paychecks Won't Stretch

Even people with good jobs feel they're losing ground. "I'm lucky to get a small raise each January, but it's not even close to keeping up with the cost of living," says Randy T. Bubar, 45, a software developer in Maine who made $58,000 last year. "I feel I have less money in my pocket at the end of each month after paying the bills."

Many PARADE interviewees echo his words. "Money just doesn't stretch as far as it used to," says Gary Zell, 42, who made $77,500 as a National Weather Service meteorologist in Tucson. Karen Freeman, 32, who earned $65,000 as an architect in Atlanta, expects her salary to improve this year. "But I do not believe my money will be worth as much in 2008," she adds.

The Job Market Contracts

A major housing downturn and nationwide belt-tightening are having a big impact on the job market. The biggest layoffs have been in construction, manufacturing and financial services. Indeed, experts predict that up to 20% of securities-industry workers may lose their jobs. Bear Stearns -- Wall Street's fifth-largest investment bank -- collapsed in March and was sold at a fire-sale price. Many of its 14,000 employees may be laid off.

As consumers spend less, hotels, restaurants and other service companies are experiencing their slowest growth in years, so they're holding off on hiring.

And older workers aren't retiring. In the mid-1980s, only 18% of people in their late 60s worked. Today, that figure is 29% and growing.

Consumers Cut Back

Americans are responding to today's economic realities by spending more cautiously, borrowing less and trying to save more. "In the past, we used the equity on our home to make major purchases without a second thought," says Karen Koen, 49, a laboratory scientist in Woodbury, Minn., who earned $65,000 last year. "Now, we're focused on getting the mortgage paid off."

"We're in self-preservation mode," says Sean Abid, summing up the American consumer's new attitude. Abid, 40, earned $61,400 as a high school guidance counselor in Henderson, Nev. He and his wife have stopped traveling for pleasure and have limited their daughter's extracurricular activities to gymnastics. "We couldn't afford swimming and dance classes," he says.

Deborah Baker, 48, an illustrator at the Army's support center in Fort Knox, Ky., says she now buys generic grocery items instead of name brands. "I budget just to get from one paycheck to the next," adds Baker, who earned $32,000 last year. "I have $40 for gas and have to cut down excess traveling to make it last two weeks."

The soaring cost of oil, now around $100 a barrel, also has driven up the cost of petrochemical-based products -- from lipstick, shampoo and shower curtains to polyester clothing and computer parts.

Impact on Mainstreet

Money is tight. A national survey by PARADE shows that nearly 75% of us made sacrifices last year to make ends meet, and a third of us worry that our jobs are in danger.

1) What is your biggest financial concern?
The price of fuel: 39%
Saving for retirement: 16%
The cost of health insurance: 14%
Mortgage payments: 13%
Sending my kids to college: 4%

2) Have you had to make sacrifices over the last year to make ends meet?
Yes: 74%
No: 26%

3) What have you had to sacrifice?
Vacation plans: 68%
Dining out: 67%
Home improvements: 52%
Going to the movies: 50%
Designer clothes: 34%
Jewelry: 32%

4) Do you save money each pay period, or are you living paycheck to paycheck?
I have nothing left for saving after meeting my expenses: 43%
I save a small amount: 37%
I save a significant amount: 14%
I spend more than I make: 6%

5) If you receive a tax rebate this year, what are you most likely to do with the money?
Pay off debt: 41%
Save it: 19%
Spend it on ordinary expenses: 17%
Treat myself: 7%

6) Are you concerned that you might lose your job?
Not very concerned: 36%
Not at all concerned: 30%
Somewhat concerned: 25%
Very concerned: 9%

7) Which of the following professionals most deserve a pay raise?
Teachers: 41%
Military personnel: 32%
Nurses: 9%
Social workers: 4%
Clergy: 2%

8) Which of the following statements best describes your dream job?
Makes a difference in people's lives: 37%
Pays really, really well: 31%
Fun: 25%
Easy: 6%
Glamorous: 1%

9) Do you agree or disagree that the economy should be the Presidential candidates' top concern?
Agree: 93%
Disagree: 7%

10) Within the past year, has your household's financial situation improved, gotten worse or stayed the same?
Stayed the same: 40%
Gotten worse: 40%
Improved: 20%




Source:Parade Magazine on Yahoo! News