CHICAGO--(BUSINESS WIRE)--In the April issue of Themes on the Economy®, Mesirow Financial’s Chief Economist Diane Swonk notes that some restraints on family incomes, originating in the financial crisis of 2008, remain in place and are likely to linger. “Structural factors that triggered income inequalities, including a shortfall in skills, technological innovation and increasing globalization, suggest that wages will remain suppressed for the majority of workers for some time to come.” Changes are most apparent in what we’ve always thought of as the vast majority of American families: the middle class, which has been “hit particularly hard in recent years. Many who had temporarily moved up into the middle class on the heels of the housing boom and high-paying construction jobs were later forced out.”
Consumer-driven businesses will have to continue adjusting to altered spending patterns, even among the much-talked-about top one percent; research indicates that many “are there for only a short period of time. They climb on windfall gains associated with the sale of an asset such as a home, but quickly fall out of the top one percent.” Constrained incomes and low inflation translate into little pricing power, which squeezes profit margins. One possible source of spending in 2014 is reminiscent of the early 2000s, when consumers tapped into the equity in their homes. Swonk predicts this will increase because, “housing price appreciation makes it easier for many to qualify for home equity lines of credit.” Otherwise, the only buoyant category is luxury goods and services catering to the very wealthy. The “majority of (income) growth was in the top .01%,” in 2012 according to income data.
For more on the economic effects of income inequalities, read Themes on the Economy for April. Archived issues can be found at mesirowfinancial.com.
Mesirow Financial is a diversified financial services firm headquartered in Chicago. Founded in 1937, it is an independent, employee-owned firm with approximately 1,200 employees globally. With expertise in Investment Management, Global Markets, Insurance Services and Consulting, Mesirow Financial strives to meet the financial needs of institutions, public sector entities, corporations and individuals. For more information about Mesirow Financial, visit its website at mesirowfinancial.com.
