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Food-Stamp Decline Shows Low-Income Relief: EcoPulse

August 01, 2014

Decline in Food-Stamp Program Shows Low-Income Relief

About 46.25 million people were enrolled in the Supplemental Nutrition Assistance Program in April. Photographer: Michael S. Williamson/The Washington Post via Getty Images

Participation in the U.S. government food-stamp program is declining modestly as low-income Americans get some economic reprieve.

About 46.25 million people were enrolled in the Supplemental Nutrition Assistance Program in April, according to the most-recent data available from the Department of Agriculture. That’s down 3.2 percent from a high of almost 47.8 million in December 2012. May figures are scheduled to be released Aug. 8.

The “gradual decline” shows some low-income households no longer use these benefits as their finances slowly have improved, said Nicholas Colas, chief market strategist at ConvergEx Group, an institutional equity-trading broker in New York, who monitors these data each month. “A portion of this population is seeing some level of economic relief.”

Participation in this needs-based program, or SNAP, is a “distress indicator,” Colas said. The number of people receiving such assistance climbed about 27 percent during the 18-month recession that ended in June 2009 and continued to rise, so the recent reduction suggests the recovery is benefiting more Americans, he said.

Wal-Mart Stores Inc. (WMT:US), Dollar Tree Inc. (DLTR:US), Big Lots Inc. (BIG:US) and B&G Foods Inc. (BGS:US) are among companies that accept payment using the program’s electronic-benefits transfer card. The money can be used only to purchase food. About 8 percent of spending is on dairy items, Gregg Tanner, chief executive officer of Dean Foods Co (DF:US). said on a Feb. 11 conference call.

‘Encouraging’ Decline

The decline in participation “is encouraging,” said Audrey Rowe, an administrator with the USDA’s Food and Nutrition Service in Washington. “SNAP is designed to expand and contract with current economic conditions and assist those who are trying to put food on the table for their families.”

U.S. gross domestic product rose at a 4 percent annualized rate in the second quarter, the most since the third quarter of 2013, after shrinking by a less-than-previously-estimated 2.1 percent in January-March, based on data from the Commerce Department. The unemployment rate was 6.2 percent in July, down from 10 percent in October 2009, while employers added more than 200,000 workers to payrolls for the sixth consecutive month, figures from the Labor Department show.

‘Consistent Progress’

The job market’s “consistent progress” has put millions of Americans back to work, helping some households withdraw voluntarily from needs-based assistance, said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. While many low-income households still are suffering, they’re seeing “modest tailwinds” as several states have increased the minimum wage and the federal level, at $7.25 an hour, may be poised for an adjustment next year, he added.

North Carolina could provide a useful barometer for the health of this demographic, Price said. That’s because it cut long-term unemployment benefits in July 2013, six months before the U.S. government, so a decline in this assistance suggests “people are getting back into the labor market.”

About 1.6 million people in North Carolina received SNAP benefits in April, down about 6 percent from a year ago, Department of Agriculture figures show.

To be eligible, applicants in the 48 contiguous states and the District of Columbia must meet certain requirements, such as gross monthly income that doesn’t exceed 130 percent of the poverty level. A household of four earning less than $2,552 is eligible for a maximum of $632 in benefits each month.

Discretionary Purchases

The average number of weekly hours employees work is among “the most important factors” influencing consumer purchases of discretionary goods and services, said Diane Garnick, chief executive officer of Clear Alternatives LLC, a New York-based asset-management firm. This measure held steady at 34.5 hours from March through July, improving from as low as 33.8 hours during the recession and several subsequent months, Labor Department figures show.

“I certainly think the U.S. economy is picking up somewhat dramatically,” with confidence another “driving force” influencing spending habits, Garnick said.

Sentiment among Americans earning less than $15,000 -- at 16.5 as of the week ended July 27 -- has averaged 19.6 this year, compared with 14.2 during the recession, according to the Bloomberg Consumer Comfort Index.

Monitoring SNAP data helps Garnick gauge when consumers have more money to spend on products from companies including Amazon.com Inc. (AMZN:US) or Netflix Inc. (NFLX:US) compared with consumer-staple providers such as Walgreen Co. or Tyson Foods Inc. (TSN:US)

Still Struggling

Almost 15 percent of the U.S. population still gets SNAP benefits, which indicates that many people continue to struggle, Colas said. Participation jumped during the recession -- after averaging 26.5 million in the preceding 12 months -- driven largely by greater awareness and encouragement efforts to get people enrolled, he said.

As a result, the modest decline could be caused in part by the program approaching its maximum number of eligible participants, Garnick said. In addition, some qualification standards have been tightened and the amount of benefits households receive was cut in November, while there also were overpayment errors in the 2012 fiscal year, she said.

Dollar Tree, based in Chesapeake, Virginia, sees that conditions are “still challenging” for low-income consumers, Chief Executive Officer Bob Sasser said on a May 22 conference call. These shoppers “have especially been pressured with less in their food stamps and less in their entitlements.”

While there’s more healing ahead -- for the labor market and low-income Americans -- Colas is encouraged by the decline in enrollment and will continue monitoring this “oddball” indicator to assess the health of the U.S. economy, he said.

“I love finding data that can connect Wall Street to the social narrative of what’s happening in the rest of the country.”

To contact the reporters on this story: Anna-Louise Jackson in New York at ajackson36@bloomberg.net; Anthony Feld in New York at afeld2@bloomberg.net

To contact the editors responsible for this story: Anthony Feld at afeld2@bloomberg.net Melinda Grenier, Gail DeGeorge


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