For many Americans, poverty may be just a paycheck away
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In spite of signs that the U.S. economy is improving, many Americans are living paycheck to paycheck and fret that a layoff could put them in financial dire straits.
While this deepest recession since the 1930s has seen an increase in the number of those socking away cash for a rainy day, personal savings may fall short of being enough to provide a significant cushion for many people in danger of becoming unemployed.
Indeed, a new Gallup pole found that 44 percent of Americans believe they could barely go a month before experiencing severe economic hardship if they lost their jobs.
"Most Americans depend on their paycheck to put food on the table and most do not have a large safety net," said Heidi Shierholz, an economist at the Economic Policy Institute think tank.
And if that paycheck is taken away, it "can be a real nightmare," she said.
At the same time, 21 percent of Americans feel they are in danger of being laid off.
And this is happening at a time when there are more than five applicants for each new job opening and the long term unemployed face serious problems finding work, as companies are reluctant to hire those who have spent long stints outside the workforce.
Those numbers, however, are similar to the figures recorded in April 2003 and February 2001, when 41 percent and 46 percent of respondents said they could last up to a month if they were laid off, Gallup said in a statement.
Still, 27 percent of the survey's respondent's felt they could last up to four months if they were laid off, Gallup also found.
But paycheck dependency varies by region, income and education level, and is more prevalent in the Southern United States and among those with a high school education or less, as well as among those earning less than 30,000 dollars a year, Gallup said.
And while there has been an uptick in the number of people securing full time jobs, 21 percent of respondents thought it was "very" or "fairly" likely that they will be laid off during the next year. That figure is nearly twice the 12 percent level in 2007, just before the recession hit, and not much higher than the 19 percent recorded in late 1982, during another deep recession, Gallup found.
In what Gallup called a reflection of the current lack of job security, 38 percent of Americans working full- or part-time said they were "not at all likely" to become jobless during the next year. That figure is down 19 points from April 2007 and the lowest such statistic Gallup has measured since 1975, the polling organization said.
Fear of job loss raises the question of whether the slight increase in consumer spending seen in March and April is sustainable. For consumer spending to reach pre-recession levels, layoffs may have to decrease and workers have to start feeling more secure in the jobs, Gallup said.
But there seems little hope of an instant rebound in the labor market, as unemployment numbers are expected to fall at a snails pace.
The national unemployment rate stands at 9.7 percent, up from 8. 6 percent in March 2009. The Congressional Budget Office estimated the unemployment rate will not drop to 5.3 percent until 2014, a figure that is still higher than the pre-recession level of 4.4 percent in March 2007.
Unemployment is projected to reach 6.3 percent in 2013 -- six years after the start of the recession and higher than the highest year of the early 2000 recession.
Ben Carliner, director of research at the Economic Strategy Institute think tank, said the U.S. economy faces the challenge of how to reinvent itself from a system dependent on the real estate and financial sectors for growth and new job creation to one that produces more tradable goods and services.
"For the past decade, the U.S. has been awash in cheap credit, but instead of spending it on productive new investments in infrastructure, science and technology, research and development or education - investments that will make the U.S. economy richer and more productive over the long term - we wasted too much of it on pointless foreign wars and granite countertops in overpriced condos," he said.
"It is going to be hard to engineer a sustainable recovery that creates lots of good, high-paying jobs, but the U.S. remains the most flexible and productive large economy in the world," he said.
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