Archive for the ‘Unemployment’ Category

The Economy Is Booming – For the Repo Man

Friday, August 22nd, 2014

“Credit is a sacred trust, it’s what our free society is founded on. Do you think they give a damn about their bills in Russia?”                                                                                                                                                 Bud in “Repo Man”

The good news for the economy is that consumers are buying more.  The bad news is that they’re not paying for what they buy.

The Urban Institute found that more than a third of Americans are not only in debt, but are being chased down by debt collectors.  Debt collectors are, of course, a last resort; they’re used when all else fails and the debtor is more than 180 days past due.  When a consumer goes six months without paying a bill, it’s a good sign the person either has no intention of paying or is unable to pay.

Yet about 77 million Americans – 35% of adults with a credit file – have debt in collections.  They owe an average of $5,178, which doesn’t sound like much, but keep in mind that’s debt that’s gone into collection, not total household debt.  It does not include mortgage debt, but does include credit card, medical and utility debt.

Consumer creditThe average American household has $15,480 in credit card debt alone and consumer debt totals $11.74 trillion.  Add in federal debt, corporate debt, state government debt, municipal debt and the debt of other countries and it’s a wonder that anyone anywhere is still solvent.

You may recall the cheering that took place in 2009, when consumer debt levels decreased.  But, as the chart shows, that was a small mogul on a steep and steadily rising mountain of IOUs.

(more…)

Baby Boomer Bust

Friday, August 15th, 2014

Each day, another 8,000 baby boomers turn 65.

The U.S. Census Bureau says there are more than 77 million baby boomers, defined as those born between 1946 and 1964.  By 2030 all boomers will be over 65 and will represent about 20% of the population.

So, given the growing number of boomers who have reached retirement age, why is the unemployment rate still so high?Over 65 retirement

Based on the official U-3 statistics, unemployment is still at 6.2%.  That’s much better than the 10% rate we had in 2009, but it’s considerably higher than the 3.9% rate the U.S. enjoyed in 2000 – which was long before baby boomers even thought about retirement.

If Americans are retiring at 65, that should open up more than a quarter million new jobs per month – on top of job growth caused by economic recovery.  So when the Bureau of Labor Statistics reports that 205,000 jobs were created in July 2014, it’s not exactly a sign of prosperity.

The U-6 unemployment rate, which includes those who have given up looking for work, is still 12.2%, which is practically European.

So why is the unemployment rate still stubbornly high?

(more…)

Attention Deficit Capitalism

Friday, June 13th, 2014

“Democracy would not be democracy, rule of the people, without at least a modicum of political attention and activity from its citizens.”                                                                                                                                                                                              James Bovard, Attention Deficit Democracy

Is anyone paying attention?

It seems as though the faster the world moves, the shorter our attention span becomes.  And today, speed is measured in nanoseconds.

Many have become complacent as technology has taken over.  High frequency trading, in which computers make the decisions, accounts for the majority of trades today.  HFT is based on arbitrage.  Computers look for discrepancies in pricing and take advantage of them, and that’s how money is made.  A company’s performance is irrelevant.

Humans created computers, but can’t compete with them.  They can try to produce a better algorithm, but the computers will make the decisions.epi_college_unemployment.png.CROP.promovar-mediumlarge

Technology has affected much more than just trading, of course.  Consider communications.  The telephone made it possible to communicate almost instantly.  The Internet, though, has made communications even faster.  Anyone with a computer can send a message to a database of thousands with the click of a mouse.  We can not only hear, but see people anywhere in the world while we talk to them, and our smartphones guarantee that we remain virtually connected at all times.

These and other technological developments have been a big boost to productivity, but they remove the human element.  Life in real time is also life on auto pilot.  We’re connected electronically, but disconnected socially and emotionally.

(more…)

Household Income Shows Troubling Outcome

Friday, May 23rd, 2014

Hold off on the victory dance.

The 2014 “Economic Report of the President” and many media reports indicate that the U.S. economy has finally recovered.  But has it?

One measure of economic health is household income.

Historically, America has prospered, as each generation typically has earned more inflation-adjusted income than the generation that preceded it.  The American Dream is not just to succeed yourself, but to provide your children with a better life.

A better life means more than money, of course, but money enables the next generation to do more, live more comfortably and worry less about making the mortgage payments.  Materialistic though it may be, it’s part of the American Dream.

So it’s alarming to see the drop in income that has taken place since 2007, when the financial crisis began.  Median household income has dropped from $56,000 to $51,017, which is a dip of nearly 10%.

We’ve had dips before, as the chart below shows, particularly during the “stagflation” years of the late ’70s and early ’80s.  But this has been the most dramatic drop in income in recent history.

Household Income

Household Income

When household income shrinks, some in the middle class risk sinking down to the lower class and those on the cusp of becoming middle class no longer are able to achieve that status.  As the lower class grows, government expenditures grow, resulting in higher taxes and even further erosion of discretionary income for those in the middle class.

(more…)

Talking the Talk

Friday, May 9th, 2014

When’s the last time you’ve heard anything about the sovereign debt crisis?

We’ve seen more activity in a tortoise than we’ve seen in Europe of late.  Maybe Vladimir Putin needs to invade Europe just to see if the cultured continent is still functioning.

Europe, though, has been quietly going about its business in much the same way as the U.S.  Bond yields have been at record lows and stock prices have been near record highs across the continent.  But, as in the U.S., just because the market is performing well, it doesn’t mean the economy is performing well.

The jobless rate in Greece is 26.7% and Spain is not far behind at 25.3%.  Overall, unemployment is at 11.8%.  In comparison, the U.S. rate is 6.3% … although the U-6 rate remains at 12.3%.Europe

Forward Guidance in Europe

Seemingly, the difference between Europe’s approach and the U.S. approach has been Europe’s reliance on forward guidance, which to date has propped up Europe’s markets.

There was talk about relying on forward guidance in the U.S. last year, but instead the Federal Reserve Board continued to buy bonds.  Talk about forward guidance is ironic, given that forward guidance is simply the act of talking … saying what you expect to do without actually doing much of anything.

(more…)

The Economic Recovery That No One Noticed

Friday, April 25th, 2014

The average recovery since the end of World War II has been 58 months.  The current “recovery” has just reached that milestone.

So maybe we should be celebrating.  But what’s to celebrate?econ_expansion25_405

If you were to define “recovery” as a period when gross domestic project (GDP) increases from one quarter to the next, yes, we’ve been in a recovery.  But a recovery is typically reflected by a period that also includes, among other things, low unemployment, strong consumer spending, increasing income, higher inflation and strong manufacturing.

Most of those signs of recovery have been either barely visible or missing, and GDP has been growing about as fast as a bonsai tree.

This has been, and will likely continue to be, the recovery that no one noticed.  It’s a recovery in name only, as for most Americans it doesn’t feel much different than a recession.  Consider what’s been happening:

(more…)

Mission Not-Quite Accomplished

Wednesday, February 26th, 2014

Remember when the announced goal of quantitative easing (QE) was to reduce the unemployment rate to 6.5%?

It’s now 6.6% and heading down.  So can we expect QE to finally end?MW-BS355_CIVPAR_20140110090655_MG

Not really.  While new Fed Czar Janet Yellen talks about continuing tapering, many believe that tapering will stop and some believe she may reverse direction and increase the rate of bond buying.  Even if The Fed continues to cut back bond purchases by $10 billion a month, it will still take more than six months for QE to end.  Minutes of the Federal Open Market Committee’s January meeting, which were released this week, suggest that the final taper would take place in October 2014.

More specifically, the minutes say, “Several participants argued that, in the absence of appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace of purchases by a total of $10 billion at each FOMC meeting.  That said, a number of participants noted that if the economy deviated substantially from its expected path, the Committee should be prepared to respond with an appropriate adjustment to the trajectory of its purchases.”

Tapering aside, does anyone really think the unemployment rate is really decreasing?

(more…)

Goodbye, Middle Class

Friday, February 7th, 2014

With all of the talk in Washington about equality, you have to wonder how the gap between rich and poor has widened to the point where even The New York Times is questioning the future survival of the middle class.

Disposable Income

Some have, indeed, made the transition from middle class to upper class and are enjoying a more comfortable lifestyle.  They may not be part of the 1%, but they’ve broken away from the middle.

The New York Times noted that, “In 2012, the top 5 percent of earners were responsible for 38 percent of domestic consumption, up from 28 percent in 1995 … Even more striking, the current recovery has been driven almost entirely by the upper crust … Since 2009, the year the recession ended, inflation-adjusted spending by this top echelon has risen 17 percent, compared with just 1 percent among the bottom 95 percent.”

Put aside your class envy for a minute, though, and recognize that consumer spending by the top 5 percent is keeping the economy out of a recession – albeit, the current recovery has been so weak we may as well be in a recession.

The Great Divide

And while some are moving up, many more are falling down, creating a greater divide than ever between rich and poor.  Consider a few statistics from a cheery blog called, The Economic Collapse (and republished on Zerohedge): (more…)

Solving Our Problems By Executive Order

Friday, January 31st, 2014

Why didn’t he think of this sooner?

President Obama announced during this week’s State of the Union address that he is going to bypass Congress and issue more executive orders during the last three years of his presidency.

You might think that sounds like a dictatorship. After all, our government was formed around a foundation of checks and balances, with Congress and the judicial branch of government keeping the President from acting on his own. He’s not a king, a tyrant or a despot. He’s president of a democratic republic, not a banana republic.Obama

But think about it. We’ve been waiting for years for Congress to handle tough issues like immigration reform, tax reform, Social Security reform, Medicare reform, trade reform and budget reform. Nothing ever happens. When Congress does handle tough issues, we end up with laws that run more than 2,000+ pages long, that no one understands and that bear little resemblance to their original intent.

Do we really want another Affordable Care Act or another Dodd-Frank Consumer Protection Act? Do we really want all of those milquetoast compromises? And what about the billions in pork that have to be added to even the most basic bill before Congress approves it?

(more…)

Some Recovery

Friday, January 10th, 2014

The government’s stimulus programs are not working and neither are a growing number of Americans.

In October, we noted that the number of Americans not working exceeded 101 million, setting a record.  But records are made to be broken and the number today is even higher – even while the official unemployment rate continues to drop.

When we wrote in October, the U.S. Bureau of Labor Statistics (BLS) reported that 90,609,000 Americans who are 16 or older were neither working nor looking for work.  Since then, the number has increased to 91,808,000.

LFPR
But that number doesn’t include unemployed Americans who are looking for work, which was 10.4 million in December, bringing the total number of Americans who are not working up to more than 102 million.  That’s an addition of nearly 1 million since October … during what has widely been viewed as a period of economic recovery.

The civilian labor force fell from 155.3 million to 154.9 million in December, bringing the labor participation rate down from 63.0% to a 35-year low of 62.8%.

While the BLS expected 197,000 jobs to be created in December, only 74,000 jobs were created.  That’s a miss of more than 100,000 jobs.  The BLS says inclement weather affected the number of forced part-time jobs being created.  “Forced part-time” jobs are those where a former marketing manager who has been out of work for two years runs out of money and takes a position working the deep fryer at Wendy’s because there are no other options.

(more…)