Daily Gains Letter

What an 81% Increase in Food Stamp Use Really Means for the U.S. Economy

By for Daily Gains Letter |

Increase in Food StampEach day, there’s growing evidence that suggests the American economy isn’t experiencing any economic growth. Unequal job creation is just one of the main topics discussed in the mainstream, but sadly, there are many other facts and figures that show a gruesome image of the U.S. economy as well.

Consider this: since the financial crisis struck in the U.S. economy, the number of people using food stamps has been increasing. In 2007, there were 26.3 million Americans who were using food stamps; fast-forward to July 2013, and that number had enlarged to 47.6 million, an increase of almost 81% at the rate of roughly 13.5% per year. (Source: “Program Data,” United States Department of Agriculture web site, last accessed October 21, 2013.)

Food stamp use in the U.S. economy is a key indicator of economic growth, showing how Americans are relying on the government to help them with even food, the most basic of needs. This is very contradictory to economic growth; if there was growth in the U.S. economy, then we would see this number decline.

Unfortunately, the horror story that is the U.S. economy just doesn’t end there.

Consumers in the U.S. economy aren’t happy. According to the Thomson Reuters/University of Michigan’s consumer sentiment index preliminary results, consumer confidence in the U.S. economy declined to a nine-month low in October. The index, which gauges how consumers feel in the U.S. economy, collapsed to 75.2 in October, from 77.5 in September. (Source: Leong, R., “Washington drives U.S. consumer sentiment to nine-month low,” Reuters web site, October 11, 2013.)

Consumer confidence is another key indicator of economic growth in the U.S. economy. If it declines, it suggests consumers are not happy and, as a result, they will hold back on their spending, which hints that consumer spending will be headed downward.

The U.S. economy has many problems that need to be fixed before any talks of real economic growth can begin. I have said many times in these pages before that for there to be prosperity in the U.S. economy, we have to see the standard of living for Americans increase. What I have just explained above does not support the argument for economic growth.

Considering all this, one must wonder what’s going to happen to the key stock indices that continue to rise in value. Will the companies that sell consumer goods be able to earn revenue at the same pace as they did before?

The conditions in the U.S. economy are suggesting that consumers are struggling. One thing investors have to keep in mind is that when consumers are facing hardships, they tend to pull back on the spending that they don’t necessarily have to incur. For example, a person who has lost a job and has very little savings will shy away from buying a new gadget, car, and/or house.

As a result of all this, companies that are involved in the consumer discretionary sector might face troubles ahead. Those investors who own a significant amount of consumer discretionary companies in their portfolio may want to take some profits and reduce their exposure to the sector.

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