Elisabeth Jordan is a careful shopper.
At 32, the middle-class, single mother of one son says that even with her better-than-average wage as a Cigna middle manager, she is feeling the squeeze of rising prices, a fairly static income, falling home values and lower stock worths.
“I can’t spend $200 a week at the grocery store,” she said. “When you’re spending $3.50 for a gallon for milk and your 4-year-old drinks it at every meal — I buy less steak and make more casseroles.”
National price checks show that in the past year, gasoline prices have jumped by more than 30 percent, and milk and dairy products are up nearly 13 percent. Tennessee Valley electricity rates will rise by another 12 percent next month, and medical costs continue to rise more than twice as fast as incomes. Meanwhile, home values have dropped nearly 10 percent and the stock market is down 16 percent from its October peak.
The years leading up to 2008 also took a bite out local residents’ dollars.
Median family income in the Chattanooga area rose by nearly $4,000, or 8.3 percent, from 1999 to 2006, according to the U.S. Census Bureau. But inflation grew more than twice that in the same period, effectively robbing the typical family of $6,121 of income since the year 2000, census figures show.
Chattanoogans also have been hurt by a decline in both stocks and home values in recent months.
The Dow Jones industrials average closed Friday at its lowest point since October 2006, down nearly 16 percent from the stock market peak reached in October 2007. Stocks were battered Friday by the release of employment figures showing that employers cut 63,000 jobs last month, the largest employment drop in five years.
Nationwide, the drop in home values over the past year helped cut homeowners’ share of equity in their houses to below 50 percent for the first time, the Federal Reserve Bank of New York reported last week.
Chattanooga area residents such as Ms. Jordan, like other Americans, are watching their purchasing power drop.
“I know I make a pretty decent wage,” said Ms. Jordan, whose income is in the $70,000 to $80,000 range, “but I’m scared.”
The economy already has affected the way she bought a car, she said, and she’d like to move from her St. Elmo home to another one in a school district where her son can spend his whole school career.
“I got a Chevy Malibu instead of the Tahoe I wanted. I put more money into a savings account rather than a 401k,” she said. “I only have 14 years to save $200,000 for college tuition.”
Ms. Jordan and other families across the nation will get some relief from Washington with the Congress-approved stimulus package tax rebates and ongoing interest rate cuts from the Federal Reserve Board.
But for most consumers, the tax rebates and lower interest rates won’t equal the costs of recent inflation.
“There’s no question that many people are feeling squeezed,” said Dr. Bill Fox, director of the Center for Business and Economic Research at the University of Tennessee. “To keep up in this type of environment, you have to be working more hours or have more people in your household working. There’s not any immediate relief, although most people hope inflation will come back down some — assuming oil doesn’t keep rising in price.”
The double-digit increases in food and gasoline come at a time when it appears to be harder for modest-income and middle-income workers to make gains, economy experts said.
“The wage gains have been much lower for modest-income workers than for higher-income workers,” Dr. Fox said. “So people at the lower-end of the income scale are going to be hit harder by what’s going on.”
Weekly earnings for factory workers in the Chattanooga area rose less than 1 percent from January 2007 to January 2008, according to the most recent figures from the U.S. Bureau of Labor Statistics.
Staff Photo by Kelly Wegel -- Elisabeth Jordan, center, holds her son Gavin while they watch their friends and relatives bowl during Gavin’s fourth birthday party at Holiday Bowl in Hixson. Gavin’s friend Aidan Maharrey, left, and cousin Rylan Stone watch with them. Ms. Jordan said a bowling birthday party is economical for her and fun for the children.
Rising gas prices — 73 cents a gallon higher than last year’s — are especially pinching workers such as Matt Wnorowski, a 30-year-old carpet industry employee who spends about $60 a week in gas commuting from Dalton, Ga., to Calhoun, Ga.
“I hear gas may go to $4 a gallon,” he said. “If it does, I’ll be lucky if I can afford to get back and forth to work every day.”
Average gasoline prices in Chattanooga jumped Friday to a record-high of more than $3.12 a gallon — up from $2.39 a gallon a year ago, according to the AAA Daily Fuel Gauge.
The extra cost for gas, utilities and groceries has forced Mr. Wnorowski to make fewer trips to visit his mother in Fairmount, Ga.
“Utility costs are up, groceries cost more, and gas is unbelievable,” he said. “I try to skim by now on everything I can. Wages haven’t gone up, but it seems like everything else has.”
Many workers in the region are taking cuts to their work hours, and those without jobs are staying out of work longer or accepting positions that pay far less than they earned previously.
Veronica Salaices, a 27-year-old mother in Dalton, Ga., said her family’s monthly bill from Dalton Utilities jumped to nearly $200 this winter, far surpassing the usual $120 for electricity, water and sewer services.
“We’re having to stretch our budget,” she said. “Fortunately, we haven’t lost our jobs or any work hours, but we know a lot more people who have, so it’s definitely a concern for us.”
Even though the local jobless rate remains below the U.S. average and Chattanooga area home prices haven’t fallen as much as in many communities, buying and financing a new home have become harder for many local families.
Courtney Saylors, 27, of Dalton, Ga., said she and her husband are trying to buy their second home after selling their first house.
“It was pretty easy to get a house then (in 2002),” she said. “Now it’s pretty hard.”
The median sale price of existing homes sold by local real estate agents in the fourth quarter of 2007 was 9.7 percent below the same period a year earlier, according to the National Association of Realtors. But higher prices for other life necessities are limiting how much the Saylors have to spend.
“Funds definitely aren’t going as far as they once did,” she said while buying groceries at Wal-Mart in Dalton. “It’s been hard, and we’ve even wondered if we should try to build a house right now.”
Even workers with secure jobs are being squeezed by higher prices.
Chattanooga computer programmer Joseph Madida commutes from Ringgold, Ga., to downtown Chattanooga every day, and he said the squeeze is forcing him and his wife to scale back discretionary spending.
“There’s not much you can do but pay the price and keep going,” he said. “It slows down the other things you can do with your money. We try to shop around more now to get lower prices, and we’re making fewer trips in the weekend. We’re watching more videos at home instead of going to the movies.”
Relief on the way
Consumers soon will get some relief from Uncle Sam from the $168 billion economic rescue package adopted by Congress last month. The plan will provide tax rebates of up to $600 for individuals and up to $1,200 for couples filing jointly, with an additional payment for families of $300 a child. Even those who didn’t pay taxes in 2007 will be eligible for the $300 rebate if they file a return.
The U.S. Treasury expects the checks to be distributed by early May after the end of the tax filing season when most Americans also are getting refunds from the Internal Revenue Service.
In addition to the rebates, the Federal Reserve continues to cut short-term interest rates to help hold down borrowing costs and stimulate more spending.
Since September, the Federal Reserve has cut short-term interest rates by 2.25 percent. The worsening economy is expected to prompt the Federal Reserve to cut its key leading rate again at its next meeting March 18, or possibly sooner, analysts said.
The fiscal and monetary stimulus steps, combined with rising exports helped by the U.S. dollar, should help the economy to rebound later this year, Dr. Fox said.
Ms. Jordan, who will get $900 in tax rebates from the stimulus package, said the money likely would go to savings.
“I think it’s not going to really encourage people to spend if they are still afraid,” she said.
Ms. Jordan said she doesn’t feel endangered herself, “but I fear losing equity on my house, and I’ve taken some precautionary steps.”
She said she also is trying to the use the example of her careful budgeting to teach her son some lessons about saving and spending.
“He’s getting it, too,” she said. “We do savings for him, as well. His bank looks like a Crayola crayon.”
Pam Sohn has been reporting or editing Chattanooga news for 25 years. A Walden’s Ridge native, she began her journalism career with a 10-year stint at the Anniston (Ala.) Star. She came to the Chattanooga Times Free Press in 1999 after working at the Chattanooga Times for 14 years. She has been a city editor, Sunday editor, wire editor, projects team leader and assistant lifestyle editor. As a reporter, she also has covered the police, ...