Throughout the country, businesses grappling with declining fortunes are cutting hours for those on their payrolls.
Self-employed people are suffering a drop in demand for their services, such as music lessons, catering and management consulting.
And growing numbers of people are settling for part-time work out of failure to secure a full-time position.
The erosion of the paycheck has become a stealth force driving the American economic downturn. Most of the attention has focused on the loss of jobs and the risk of layoffs. But the less-noticeable shrinking of hours and pay for millions of workers around the country appears to be a bigger contributor to the decline.
Though official unemployment has risen only modestly, to 5.1 percent, the winnowing of wages and working hours for those still employed has become a primary cause of distress, pushing many more Americans into a downward spiral, economists say.
Moreover, this slippage is a critical indicator that the nation may well be on the verge of a recession, if not already in one.
Last month, the hours worked by those on American payrolls dropped, compared with six months earlier, according to an index maintained by the Labor Department. The last time the index moved into negative territory was February 2001, when the economy was on the doorstep of recession.
A similar slide emerged in August 1990, one month into what proved an even more severe downturn.
From March 2007 to March of this year, the average workweek reported in the private sector slipped slightly to 33.8 hours, from 33.9 hours, while overtime for manufacturing workers fell by a larger margin.
Meanwhile, at the end of last month, more than 4.9 million people were working part time either because they could not find full-time jobs or because their companies had cut hours in the face of slack business, according to a Labor Department survey. That represented an increase of 400,000 since November.
And on Wednesday, the government reported that average earnings slipped in March after accounting for the rising costs of food and fuel – the sixth consecutive month that pay failed to keep pace with inflation.
As people bring home paychecks that do not go as far, they are forced to economize, eliminating demand for goods and services that once captured their dollars, spreading pain to providers like auto dealers and lawn care providers.
They, too, must trim their outlays on pay, shrinking working hours more and furthering the slowdown.
"It means spending slows going forward," said Robert Barbera, chief economist at the trading and research firm ITG.
Paychecks are diminishing just as millions of Americans are finding their access to credit constricted as well.
Borrowing against the value of real estate – a crucial artery of household finance in recent years – has been pared back as home prices have plummeted and as banks have tightened lending standards in the aftermath of the collapse of the housing bubble.
"At this point, those avenues are blocked," said Jared Bernstein, senior economist at the labor-oriented Economic Policy Institute in Washington. "Consumption going forward is going to be in large part a good old-fashioned function of paychecks and incomes."
Even before the rollback in working hours, pay was barely keeping up with the rising costs of gas and food.
From February to September of last year, the average hourly earnings for workers in the private sector was still growing at a slightly faster clip than the pace of inflation, according to the Labor Department.
But from November through March, as employers began to scale back in a variety of ways, wage growth fell below the pace of inflation, meaning that paychecks were effectively shrinking.
