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Sandra Benner, 66, a retiree on a fixed income, shops for bargains at Target in the Harlem section of New York.
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updated 10/6/2010 8:01:09 PM ET 2010-10-07T00:01:09

Once a month, just after midnight, the beeping checkout scanners at a Walmart just off Interstate 95 come alive in a chorus of financial desperation.

Here and at grocery stores across the country, the chimes come just after food stamps and other monthly government benefits drop into the accounts of shoppers who have been rationing things like milk, ground beef and toilet paper and can finally stock up again.

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Shoppers mill around the store after 11 p.m., killing time until their accounts are replenished. When midnight strikes, they rush for the checkout counter.

"The kids are sleeping, so we go do what we've gotta do. Money is tight," Martin Young said as he and his wife pushed two carts piled high with ground beef, toilet paper and other items.

The couple said they need food-stamp benefits, which are electronically deposited onto debit cards, because his job as a restaurant server doesn't quite cover expenses for their five children.

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"We try to get here between 10:30 and 11 because we know we've got a lot of stuff to get. That way by 12 o'clock we're at the line cashing out and done," he said.

More than a year after the technical end of the Great Recession, millions of Americans still have a hard time stretching their dollars until the first of the month, or even the next payday.

One in seven Americans lives in poverty, and more than 41 million are on food stamps, a record. Last year the figure was about 35 million.

As a result, there are more scenes like the one last week at a 24-hour Kroger in Cincinnati. As the final hours of September ticked down, about five dozen cars were in the parking lot. It's much slower on normal weeknights.

"This here is emergency bread," said Melinda Patterson, 36, who has been without a full-time job since the recession began and had started shopping 20 minutes before midnight. That's when $435 in food stamps kicked in to help feed her six children.

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The same night, Shavon Smith and her four young children were loading up on meat, fruit, bread, water, tissues and cereal at Kroger's Food 4 Less store on Chicago's West Side. Those staples had begun running out more than a week earlier.

"Tonight, they were tired and hungry, so I said, 'Let's go ahead and do it now,'" said Smith, who had $600 in food stamps electronically deposited to her electronic debit card at midnight.

"They can go to the fridge and get whatever they want in the beginning of the month, and we have bigger meals," a reprieve from the rationing that is the rule for the rest of the month, she added.

Stores have always noted swings in spending around paydays — a drop-off in buying in the days before shoppers receive paychecks or government subsidies, followed by a spurt of spending once the money is available.

The recession and its aftermath have taken the trend to an extreme. Tight credit is a factor, too. When cash runs out, many can no longer fall back on credit cards to buy what they need.

There is no broad data on the impact of this shopping pattern, known as the paycheck cycle. The timing of government assistance is different from state to state, and when payday falls varies by employer.

But stores have learned how to adapt to the surges, which typically occur on the first and the 15th of the month, when many people get their paychecks. They monitor the pay schedules from big employers in the towns where they operate.

Walmart, Kroger, Kmart and others have worked with their suppliers to stock more gallons of milk and supersized packages of toilet paper and detergent at the beginning of the month. Smaller packages and store brands are given prominence leading up to payday.

Walmart is collaborating with vendors to offer even smaller sizes for under a dollar to win back customers who are heading to dollar stores to buy mini-size laundry soap and other items because they only have a few dollars left until the next payment. Earlier this year, Kmart began pushing $1 items on snack packs and other food items, timed a week before the 15th of each month to help customers stretch their budgets.

"This is the new normal," said Richard Hastings, macro and consumer strategist with Global Hunter Securities. "This is going to be like this for many years to come."

Not counting Social Security, one in six Americans now receives some form of government assistance, including food stamps, Medicaid and extended unemployment benefits.

These government payouts now account for about 20 percent of Americans' total after-tax income, said David Rosenberg, an economist at investment firm Gluskin Sheff. The average over the past half-century is 13 percent.

The high number of people on government assistance is atypical for this stage of an economic recovery. Usually at this point, growth in assistance rolls should be flattening, Rosenberg said.

Americans relying on government benefits are doing their homework to stretch the payments. The vast majority interviewed by The Associated Press as October dawned last week were carefully scrutinizing prices and had a game plan of what to buy where.

In Harlem, shoppers were running back and forth from Target to Costco to compare prices just after 10 a.m., the time most of the stores open, on the first day of the month.

Sandra Bennerson, 66, who is retired and gets Social Security on the first, was in the detergent aisle at Target, explaining to a reporter why Costco had a better deal on Tide. Costco was offering 20 more ounces for the same price.

"Every penny counts," she said.

In Cincinnati, Patterson said she had learned how to budget. She said she hopes the midnight shopping ends soon.

"It's going to be getting colder," Patterson said. "Hopefully, it won't be like this much longer."

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Use of food stamps rises to record levels

  1. Closed captioning of: Use of food stamps rises to record levels

    >>> it's one of many economic stats you don't want to see rising, but food stamps are being printed at record levels in this country. 41.8 million americans received government food assistance in the month of july. that's another all-time record and up a staggering 17.5% from the year before.

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