Pawnshops show uneven US recovery
Inflated prices still hit low-income Americans
EL PASO, Texas – Clay Baron has everything in his pawnshop from gold rings and pearl necklaces to vintage cowboy boots, silver belt buckles, stereos and ticking clocks.
The only thing he’s short on is space. “Right now we have a glut of inventory,” Baron said, “which tells me that our clientele doesn’t necessarily have money.”
Accumulating pawnshop inventory means fewer buyers than sellers – a sign that for the lowest-income Americans, times remain tough.
President Joe Biden is trying to convince Americans that the economy is on the upswing, and he has been touting economic indicators that he says prove it: easing inflation, rising job growth and wages, unemployment near record lows, a surging stock market.
But the president’s rosy economic picture hasn’t reached everyone.
Two years of steep inflation has hit working families hard, especially those living paycheck to paycheck.
Baron’s store – called Dave’s Pawn – is an icon of downtown El Paso. Outside, an Elvis statue stands with a permanently cocked hip and a guitar in hand, while the King’s hits blast onto the street.
The shop, which his family has owned for four generations, sits at an economic borderline.
One block north, in the heart of a revitalized downtown, tourists and locals can pay $200 a night to stay at one of El Paso’s fanciest hotels, smoke a $45 cigar and drink craft cocktails at a bar covered by an original Tiffany stainedglass dome.
One block south, shoppers wheeling metal carts flock to buy made-in-China knockoff purses, discount lingerie and sportswear, and other items both retail and wholesale.
It’s an urban metaphor for the U.S. economy’s uneven recovery.
Some Americans – people with retirement
plans, savings and stock holdings – may gripe about inflation and the economy, but they’re doing all right.
Others are surviving pawn to pawn.
Pawn balances rising across US
The pawnshop, for those who don’t have a credit card or a bank account, acts like a sort of rainy day fund.
Pawnshop owners like Baron lend money to customers, secured by the item pawned. They hold the merchandise for safekeeping during the term of the loan, and sometimes a grace period, until the customer pays back the loan plus interest and fees.
Loans typically last 30 to 90 days. But right now, customers are pawning and not coming back to reclaim their rings or belt buckles.
Pawn balances have risen across the country in the past two years, said Laura Wasileski, spokeswoman for the National Pawnbrokers Association.
The reasons, she said, include “costof-living increases, the lack of access to credit, short-term emergencies, and the fact that 50% of American households do not have $1,000 in savings to cover those emergencies.”
Nearly 6 million, or 4.5%, of houseguitar.
holds in the U.S. had no bank account in 2021, according to the latest survey data available from the Federal Deposit Insurance Corp., the agency that insures the banking system.
People of color, those with less education, lower incomes, disabilities and single-mother households were more likely to lack bank access, according to the FDIC.
A fifth of survey respondents said they didn’t keep a bank account because they didn’t have enough money to meet the minimum balance requirements – often $100 to a few hundred dollars.
‘How I make ends meet’
At Baron’s shop one recent afternoon, Arturo Washington was less worried about minimum balance requirements than he was about filling his gas tank.
Washington, 74, leaned into the pawn counter and asked what he could get for putting up an electric guitar. Over his head a neon sign glowed in Spanish with the words “I buy gold and silver.”
The retired repairman knew the pawnshop clerk by name. He had been a customer at Baron’s shop for nearly 20 years. The clerk offered him $300 for the A gentle negotiation ensued.
“Could you give me $350 today?” Washington asked.
He had to make an hour’s drive for some appliance parts, he told her, and needed a full tank of gas, plus money for the parts. The pawnshop clerk sweetly said she couldn’t give him that much but she’d bump him to $325. Washington thanked her and walked out with his cash.
“Sometimes I get stuck, economically speaking,” he said in Spanish. “So I come and pawn things, and that’s how I make ends meet.”
Inventory increases in tough times
What Baron sees from the counter of his family-owned store tracks with national trends.
“When times are good and people have money, there’s going to be more money coming in. People will be buying the stuff,” Baron said. “When people need money, there’s going to be more money going out of the store, which is what’s happening now.”
Two of the largest, publicly traded pawnshop corporations in the U.S. – which between them own roughly 1,700 pawnshops nationwide – are also reporting growing inventory and increased demand for short-term loans.
FirstCash Holdings Inc. operates nearly 1,200 pawnshops under the FirstCash and Cash America brands in 29 states and the District of Columbia. The company reported “record pawn receivables” in its most recent year-end earnings report and a 10% increase in inventory at its U.S. stores.
EZCORP Inc. also owns 530 pawnshops in the U.S. and reported an 8% increase in inventory at U.S. stores in the company’s latest earnings report. The “challenging macroeconomic backdrop” continued to fuel demand for shortterm cash loans, the company said.
The price of gold – which investors turn to as a hedge against inflation – has helped drive up pawn inventory, too, as consumers of varying income levels pawn gold items to cash in on the favorable market price. An ounce of gold hit an all-time record – over $2,200 per troy ounce – last week.