US consumers tapped out as holidays approach

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American shoppers have a way of rallying when the holidays roll around. But years after the Great Recession, consumers' budgets remain badly squeezed by flat wages, higher payroll taxes and a weak job market.

"It's been a tough year for consumers overall," said Target Chief Financial Officer John Mulligan. "They started the year with the payroll tax increase, and lower and middle-income consumers bore the brunt of that. They were already stressed. The economy has improved slowly over time, but it's been a choppy recovery for sure."

Choppy indeed. With the economy growing at just 2.2 percent since the recession ended in June 2009, there aren't enough good-paying jobs for the millions of Americans out of work or looking for more hours.

Much of the growth in new jobs is in relatively low-wage, low-skilled industries such as retailing and restaurants. Even with the growth in those sectors, there aren't enough jobs to go around—and won't be until overall growth picks up.

"The improvement in the employment and improvement in labor markets has been slower than I'd like to see," said Boston Fed President Eric Rosengren. "We need to see growth much closer to 3 percent than 2 percent if we want to get to full employment in a reasonable time period."

(Read more: US consumer sentiment unexpectedly falls in November)

Though the latest read on GDP showed the economy expanding by 2.8 percent in the third quarter, that isn't likely to cheer up Fed officials much. Too much of the growth came from a build-up in inventories—goods sitting in warehouses and on store shelves that consumers aren't buying.

Final sales rose just 2.0 percent, and overall spending inched up just 1.5 percent, the smallest gain in two years, according to Band of America Merrill Lynch economists Ethan Harris and Joshua Dennerlein.

"In other words, the economy remains stuck in the mud," they wrote in a research note Thursday.

(Read more: Consumers trim spending as DC mess drags on)

American households apparently caught a break in September,based on the latest reports on jobs and income. The government reported that 204,000 new jobs were created in September—and personal income rose by 0.5 percent, after similar gains in August.

But the extra income didn't free up consumers wallets.The data also showed that—adjusted for inflation—consumer spending inched up just 0.1 percent in September after rising 0.2 percent in August.

While housing prices have slowly recovered in many parts of the country, mortgage applications remain sluggish, especially for younger first-time home buyers. That weakness spills over into sales of a number of related categories of goods and services—from new appliances to homeowners insurance.

Other industries feeling profit pressure are tightening payrolls. That includes the health-care sector, which produced a steady stream of new jobs even through the depths of the Great Recession.

The widespread efforts to control health-care spending are beginning to show up in the jobs data, according to employment consultant John Challenger.

"The one thing that both parties agree on is that we have to cut costs out of the health-care system," he said. "That usually means when companies do that, there are going to be job cuts. Inevitably were going to be seeing job cuts coming out of that sector for months or maybe years to come."

Consumer spending will remain sluggish as long as job and wage growth does. In the meantime, lower gasoline prices may help, say some analysts.

"It's pretty tough out there," said Jan Kniffen, a retail industry analyst at Worldwide Enterprises. Paying less for gas "puts a lot of money back into discretionary income."

Despite the widespread obsession with oversized numerals posted on top of the pump, those prices make up a relatively small portion of the average household budget: about $3,100 a year for a median household, with income of roughly $50,000.

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Since this year's peak in February, gasoline prices have fallen by about 15 percent, saving that family about $465. That may be enough for a nice TV for Christmas, but it's less than 1 percent of their total household income.

Not everyone is stretched. Luxury retailers are expecting another relatively good holiday shopping season. Brisk sales of high heels and handbags boosted profits for high-end designer Michael Kors by 45 percent in the past year, the company reported Tuesday.

It remains to be seen whether the shutdown—and a pair of looming deadlines for a repeat budget battle—gives consumers pause. Some economists believe people's loss of faith in Washington may cripple confidence and prompt shoppers to hunker down for the holidays.

But others argue that the impact of this summer's political spectacle was transitory.

"We're a happy nation, even with Washington doing everything it can to depress us," said Barry Sternlicht, chairman and CEO of Starwood Capital Group. "We have a very short memory. We like the fact our football teams are on the field and Congress hasn't screwed that up. So we're shopping."

UPDATED: This story was updated with Friday's jobs report numbers.

—By CNBC's John Schoen. Follow him on Twitter @johnwschoen .