Crisis aside, many face other economic woes

Far from Wall Street, Americans deal with their own financial crises

6 October 2008
By Allison Linn

Lisa Holt Johnson isn’t worried about the financial crisis on Wall Street; she’s too busy worrying about the financial crisis in her own home.

Johnson, 43 and a single mother with two kids, makes $9.25 an hour working in property management in Gastonia, N.C. To make ends meet as food and fuel prices have risen, every month Johnson plays a juggling act with her bills, often asking for extensions on some so others can get covered.

When all the bills are paid, there’s often only $35 or $40 left for the week’s groceries, compared with $65 or $70 a year ago. Extras that she could once afford — such as a trip to a museum with her 12-year-old daughter, or to Toys "R" Us with her 6-year-old son — are out of the question now. Although she has health insurance, she recently had to cancel a battery of tests her doctor ordered because the clinic required a $550 deductible upfront, and she didn’t have the money.

Asked about the Wall Street debacle recently, she said: “I’m not worried about that. I’m worried about average living, about real life.”

The crisis on Wall Street has drawn attention away from the financial problems many Americans were already facing because of the weak economy.

Most people are paying more than they were a year ago for nearly all their necessities: food, gas, home heating, even household cleaning products. The jobless rate has been climbing steadily, and home prices continue to weaken.

U.S. businesses also are feeling the fallout as the financial crisis compounds already weak economic conditions. Companies ranging from chicken producer Pilgrim’s Pride to software giant Microsoft have fretted about the economic climate. If businesses see profits drop, that could lead to more job losses and further erode the overall economy, making it harder for everyday Americans to make ends meet this winter.

“We think this is a recession,” said David Wyss, chief economist with Standard and Poor’s.

For Johnson, who is living week-to-week and struggling just to stay above water, it can be frustrating to hear about a multibillion-dollar bailout for an industry whose executives make millions, while she’s worrying about how she’s going to make it to the end of the week with $2 in her bank account.

“It’s really bad, and I’m not on welfare — I couldn’t get it if I wanted,” Johnson said. “I’m working. I’m trying.”

Johnson buys clothes for her family at Goodwill or the consignment store. At the supermarket, she hates having to tell her kids they can’t have even a small treat, like a box of cookies, because she needs to focus on necessities like milk, eggs and oatmeal.

“I am a nervous wreck when I am in that grocery store,” she said.

For some families struggling with soaring costs, there isn’t even money left for the grocery store.

Ross Fraser, spokesman for the hunger relief group Feeding America, formerly America’s Second Harvest, said an April survey showed that food banks were seeing a 15 percent to 20 percent increase in clients — and that was before this summer’s hurricanes and flooding left more Americans in need of help.

Twenty year ago, Fraser said the food banks mainly serviced homeless and very low-income people, but economic conditions have changed that.

“What we’re anticipating and seeing now (is that) we’re going to be feeding the working lower middle class and probably the working middle class, as people are becoming squeezed by paying more for food and paying more for gasoline,” he said.

With demand high, Fraser said he and others who work in nonprofits are now worrying about whether the crisis on Wall Street will mean that some major donations dry up, adding even more stress to their organizations.

As colder weather settles in, there also is concern about how Americans will be able to pay their home heating bills. Although fuel costs have fallen from their highs a few months ago, prices remain high by historical standards.

Mark Wolfe, executive director of the National Energy Assistance Directors’ Association, said he has been heartened by the combination of lower fuel prices and more federal assistance for struggling families who need help with their heating bills. Still, he said, for most Americans salaries have not kept up with heating costs.

Up until a few years ago, Wolfe said, "Energy was just really cheap, and it was wonderful for ordinary people. And, in a relatively short period of time, energy has gone from really cheap to not so cheap to kind of expensive. And that’s creating a lot of turmoil.”

Wyss, the economist, is still predicting this will be a mild recession. Still, he notes that even a shallow recession is a tough adjustment for many Americans, who endured a minor recession in 2001 but haven’t experienced a sharp economic contraction since 1991.

He expects that the unemployment rate will eventually rise to 7 percent, from 6.1 percent currently and 4.7 percent a year ago. And, he notes, regional developments, such as a strike at aircraft maker Boeing and job losses in New York as a result of the financial crisis, also could be a drag on the economy.

Retail sales, a major driver of the economy, are expected to remain weak through the holiday season, both because people are being squeezed by higher costs for necessities and because it is harder to get a loan for big items like a car. Wyss also is seeing that even those who are in pretty good financial shape are cutting back “because it’s the thing to do.”

Pamela Fettig still has a job in the publishing industry and her mortgage isn’t in jeopardy. Still, the 36-year-old Indianapolis resident said the current economic downturn has led her to cut back her spending, including canceling a planned vacation.

That’s partly because many in her family are already feeling the pinch. Fettig said her brother recently lost his job, and her father was forced to sell his small business a few years back because of high costs.

“It’s really scary right now,” she said.

To those like Fettig who are already struggling, the dire warnings from politicians about how things could get worse without a federal bailout for Wall Street feels patronizing.

“It’s like, ‘Come on, who do you think you’re talking to?’” Fettig said. “We’re living it.”

Geoffrey Thompson, 47, is concerned about how the government is dealing with the crisis on Wall Street. But the engineer, who lives in Austin, Texas, is more concerned about other economic problems that impact him — and many Americans — more directly. Those include the weak U.S. dollar and high food prices.

“I don’t look at it like, ‘Phew. Oh, they’re bailing out the banks. Now things are good,’” Thompson said.