A new report from the U.S. Department of Labor’s Bureau of Labor Statistics (BLS) is pure gold for a numbers and budget geek like me. The BLS recently published its annual consumer expenditures report, which examines how much Americans spend
on a variety of categories — from housing to food, apparel to entertainment and much more. In 2012, the average annual expenditure
per consumer unit was $51,442, which was 2.5 percent more than spending in 2011.
Great; spending is up but what is a consumer unit? The BLS defines a consumer unit as, “families, single persons living alone or sharing a household with others but who are financially independent, or two or more persons living together who share expenses.”
So, my family of four is a consumer unit but so is that single college guy working part-time and living in the dorms. This puts the number into perspective – the $51,442 in annual expenditures figure looks small to me, but that single college guy probably doesn’t make anywhere near that annually. Hence, the importance of averages and spending trends.
In 2012, the average annual income before taxes was $65,596. Average spending in key categories, as well as the percentage of income, follows:
- Housing: $16,887 (25.7 percent of average income)
- Transportation: $8,998 (13.7 percent)
- Food: $6,599 (10.1 percent)
- Health care: $3,556 (5.4 percent)
- Entertainment: $2,605 (4.0 percent)
- Apparel and services: $1,736 (2.6 percent)
With the exception of transportation, spending in all of the categories increased over 2011 figures. After reading through the 2012 report, I decided to look back to 2002 and compare spending as a percentage of income before the Great Recession to post-recession figures.
Average annual expenditures in 2002 were $40,677 and the average annual income
was $49,430. So, expenditures were about 82.2 percent of income compared to 78.4 percent in 2012. Overall, consumers spent less, but how does it stack up when the spending is broken down into the six categories featured above?
- Housing: $13,283 (26.9 percent of average income)
- Transportation: $7,759 (15.7 percent)
- Food: $5,375 (10.9 percent)
- Health care: $2,350 (4.8 percent)
- Entertainment: $2,079 (4.2 percent)
- Apparel and services: $1,749 (3.5 percent)
Compared to average annual income, consumers spent less on housing, transportation, food, entertainment and apparel and services in 2012 than they did in 2002. They are spending more on health care, though. This number is rather interesting, especially when you consider the fact that the Health Insurance Marketplace
opens up on Oct. 1, 2013.
I’m sure that the immediate assumption for many is that Obamacare is this horrible piece of legislation and the increase in health care expenditures is proof positive that the Affordable Care Act should have never passed. I look at it differently, though.
Health care costs are on the rise and this proves that Obamacare, and specifically the marketplace, are essential to the ongoing economic recovery. If more people can afford health insurance coverage, out-of-pocket health care expenditures are likely to go down and the BLS expenditures report in a few years will look a bit different than the 2012 report.
In addition to the difference in health care spending, two other changes caught my eye. In 2002, 66 percent of consumers were homeowners but in 2012, the number had fallen to 64 percent. Just two years prior, in 2010, 66 percent of consumers were still homeowners. The post-housing bubble foreclosure crisis is likely to blame for the decrease. Perhaps next year the number will rise as the housing market recovers.
Another change that I consider important is the average age of the reference person. In 2002, the average age was 48.1 but that jumped to 50.0 in 2012. Americans are living longer, which raises many questions and concerns. Should the retirement age still be 65? Will Social Security funding last another 20 years? Are Americans saving enough money for extended retirements? I don’t have the answers to any of these questions, but it is amazing what can be deduced when you look at these two reports and the changes in spending over a 10-year period.