Pawn shops tell a different story

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EL PASO, Texas – Clay Baron has everything from gold rings and pearl necklaces to vintage cowboy boots, silver belt buckles, stereos and ticking clocks at his pawn shop.

The only thing he lacks is space. „We have a lot of inventory right now,” Baron said, „which means our customers don't necessarily have cash.”

A pile-up of pawn shop inventory means fewer buyers than sellers — a sign that for low-income Americans, times are tough.

President Joe Biden is trying to convince Americans that the economy is on the upswing, and he cites economic indicators that he says prove it: easing inflation, job growth and rising wages, unemployment at record lows, and a rising stock market.

But the president's rosy economic picture isn't reaching everyone.

Two years of steep inflation have hit working families hard, especially those living paycheck to paycheck.

Baron's Shop – Called Dave's An icon of the city of El Paso. Outside, an Elvis statue stands permanently cocked at the hip and guitar in hand, while King's hits blast down the street.

The shop, owned by his family for four generations, sits on the economic boundary.

A block north, in the heart of the revitalized downtown, tourists and locals alike can pay $200 a night to stay in one of El Paso's finest hotels, smoke $45 cigars and drink craft cocktails at a bar covered by an original Tiffany stained-glass dome. .

A block south, shoppers wheeling metal carts flock to buy knockoff purses made in China, discount underwear and sportswear, both retail and wholesale.

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It's an urban metaphor for the US economy's uneven recovery.

Some Americans — those with retirement plans, savings, and stock holders — may be griping about inflation and the economy, but they're doing everything right.

Others survive by pawning.

'Not $1,000 for American families'

A pawn shop acts as a kind of rainy day fund for those without a credit card or bank account.

Pawn shop owners like Barron's lend money to customers against a pawned item. They hold the goods for the duration of the loan and sometimes the grace period until the customer repays the loan with interest and fees.

Loans typically last between 30 and 90 days. But now, customers are pawning and not coming back to retrieve their rings or belt buckles.

„Mortgage balances have risen across the country in the past two years,” said Laura Wasileski, a spokeswoman for the National Association of Pawnbrokers.

He cited „rising cost of living, lack of credit, short-term emergencies and the fact that 50% of American households don't have $1,000 in savings to cover those emergencies.”

In 2021, 6 million, or 4.5% of households in the U.S. will not have a bank account, according to recent survey data from the Federal Deposit Insurance Corporation, which insures the banking system.

According to the FDIC, people of color, people with less education, people with low incomes, people with disabilities and single-mother households are more likely to lack access to banking.

About one-fifth of survey respondents don't have a bank account because they don't have enough money to meet minimum balance requirements — often between $100 and a few hundred dollars.

Repeatedly trying to beat customer inflation

On a recent afternoon at Barron's, Arturo Washington was less concerned about minimum stock requirements than filling his gas tank.

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Washington, 74, leaned over the soldier counter and asked what he could get for an electric guitar. Above his head flashed a neon sign with the words „I buy gold and silver” in Spanish.

A retired repairman knows a pawn shop clerk by name. He was a customer at Barron's store for about 20 years. Clark gave him $300 to buy the guitar. A smooth negotiation took place.

„Can you give me $350 today?” Washington asked.

He had to make an hour's drive for some equipment parts, he told her, and needed money for a full tank of gas and parts. Sweetly, the pawn shop clerk said she couldn't pay him that much, but she'd outbid him for $325. Washington thanks her and leaves with his money.

„Sometimes I'm stuck, economically speaking,” he said in Spanish. „So I come and pawn things, that's how I end up.”

Big pawn companies are seeing inventory rise

What Barron sees with national trends from the counter of his family-owned store.

„When times are good, when people have money, more money comes in. People buy things,” Baron said. „When people need money, more money comes out of the store, and that's what's happening right now.”

The two largest, publicly traded pawnshop companies in the U.S. — which between them own about 1,700 pawn shops nationwide — also report growing inventory and growing demand for short-term loans.

First Cash Holdings Inc. It operates nearly 1,200 pawn shops under the First Cash and Cash America brands in 29 states and the District of Columbia. The company said in its most recent year-end earnings report that it „recorded soldier receivables” and increased inventory at its US stores by 10%.

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EZCORP Inc. It has 530 pawn shops in the U.S. and inventory at the company's U.S. stores grew 8% Latest earnings report. The company said a „challenging macro-economic backdrop” continues to drive demand for short-term cash loans.

The price of gold – which investors turn to as a hedge against inflation – helped boost pawn inventories, as consumers at various income levels pledged gold items to cash in on favorable market prices. An ounce of gold hit an all-time high this week — more than $2,200 a troy ounce.

Lime prices are a sign of a sour economy

Washington, an El Paso client, blames Biden for his fiscal restraints. High inflation has affected people like him on fixed incomes, he said.

„For those of us who are retired, the economy is going to get really bad,” Washington said.

„The cost of basic foods is very, very expensive,” he said. „Every day they raise the price of basic foods. A lime, small, 35 cents. It's not fair.”

Despite a downward trend over the past year, the Bureau of Labor Statistics reported that consumer price increases rose in January and February, raising concerns that the inflation battle is far from over.

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Barron, the store owner, tried to pinpoint the moment the economy hit his customers.

„Certainly since COVID, but even before COVID,” he said, „I don't want to get political, but even at the beginning of the Trump administration, people seemed a little dry.”

Lauren Villagran can be reached at [email protected].

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