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The Consumer: Better Than Feared, but Still Struggling

Stacy Curtin

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On the heels of better-than-expected October retail sales report, Wal-Mart and Target -- the nation's two largest retailers -- posted healthy increases in same-store-sales for the third quarter Wednesday.

For Wal-Mart, that's a pretty big deal. The 1.3% uptick reverses a 9-quarter streak of negative sales growth at stores that have been open for more than a year. Target same-store sales increased 4.3%.

It was just two months ago that fears of another recession had gripped global markets. But in those few months, GDP and retail sales have surprised to the upside, calming fears that the U.S. might be headed back into a period of negative growth.

All these positives are certainly welcomed, but, as The Daily Ticker's Aaron Task and Henry Blodget discuss in the accompanying video, by no means does this signal the U.S. consumer is back and ready to fuel a full-blown recovery.

Underscoring this point is the fact that the savings rate in this country has dropped back down to the 2007 lows before the debt-bubble (housing bubble) burst. On average these days, Americans are saving only around 4% of earnings a month.

To further highlight the struggles facing most Americans, we learned last week that 49 million people are living in poverty, a much higher number than previously thought. At the same time, the real unemployment rate is roughly 16% when you include the underemployed, and wages continue to shrink. (See: Taken to Task: A Poverty of News, an Embarrassment of Media)

And there are further developments today on the decline of America's middle class, which The Daily Ticker has covered extensively over the years. A new study by Stanford University, using U.S. Census data, found that middle class neighborhoods have shrunk dramatically since the 1970s. "In 2007, the last year captured by the data, 44 percent of families lived in neighborhoods the study defined as middle-income, down from 65 percent of families in 1970," reports the New York Times.

So while the average consumer is doing better than feared, a recovery is not imminent and not likely for months -- or years -- to come.