Tax Season Was Mid and the Food Stamps Got Cut: Why Nobody is Spending Money at the Mall Right Now
With Uncle Sam cutting tax refunds by $25 billion and ending extra SNAP benefits, folks are officially keeping their wallets closed.
Real talk, the block is hot and the pockets are empty. If you’ve been wondering why the local mall looks like a ghost town and nobody is out here buying new furniture or big-ticket items, the government just dropped the receipts. Retail spending fell by a whole 1% in March 2023. The economic experts thought it was only going to drop 0.4%, but they clearly aren't paying attention to how fast real people have to tighten up their budgets when the money stops flowing.
The main reason everyone is locking down their spending is because tax season was straight-up mid this year. The IRS only sent out $84 billion in tax refunds this past March. Now, that sounds like a massive bag, but compared to March of 2022 when they sent out $109 billion, that's a $25 billion shortage. That’s billions of dollars that regular working folks rely on every spring to buy appliances, fix up their cars, or get ahead on their bills. When those refunds came back short, people had to cancel their shopping plans.
On top of that, the government officially stopped handing out those extra pandemic food stamps. Those enhanced SNAP benefits expired back in February, meaning by the time March rolled around, families were forced to spend their actual cash just to keep food on the table. When you gotta spend your grocery money out of your own pocket, you aren't going to department stores to buy new gear. General merchandise stores saw their sales drop by 3% in March because of this double whammy.
Gas station sales also slid by 5.5% in March. Even if you don't count the gas stations, overall retail spending still took a 0.6% hit from February. Sure, the government says retail spending is up 2.9% compared to last year, but we all know that's just because everything costs way more now due to inflation. You're paying more cash for less product, plain and simple.
Bank of America tracked household credit and debit card spending and confirmed that card swiping slowed down to its lowest pace in over two years. They pointed the finger directly at the smaller tax returns, the expired SNAP benefits, and the fact that wages are slowing down. People are simply running out of extra funds to keep the economy moving.
To make matters worse, the job market isn't looking as strong as it used to. The Bureau of Labor Statistics reported that average hourly earnings grew 4.2% year-over-year in March, which is down from the 4.6% rate we saw in February. That is the smallest annual wage hike since June 2021. The Employment Cost Index is also showing that worker pay gains are cooling off. So while everything at the store is still expensive, your paycheck is growing slower, your tax refund was short, and the extra help is gone.
At the end of the day, you can't run an economy on vibes when people's pockets are hurting. Between the banking crisis making everyone paranoid about a recession and the government cutting back on the financial lifelines, regular folks are doing what they have to do to survive. March's retail drop is just the reality of what happens when you squeeze the working class too hard.
