Archive for the ‘Personal Income’ Category

The Fed Thinks Higher Prices Are Good For You

Monday, April 10th, 2017

The Federal Reserve Board’s quantitative easing program was an unprecedented monetary experiment that dumped trillions of dollars of new money into the economy.

Historically, adding that much money to the economy should have caused hyperinflation, but the economy was so weak, it took the Federal Reserve Board eight years of loose monetary policy to boost the U.S. inflation rate to 2%.

Now, though, some Fed members think that 2% isn’t enough.

Readers old enough to vote during the Carter and Ford years remember when the Fed’s role was to lower inflation, not raise it. In 1974, inflation hit 11.03%, and from 1979 through 1981 inflation reached 11.22%, 13.58% and 10.35%. In the Ford era, Whip Inflation Now (WIN) buttons were created. They did little to control rising prices.

We haven’t seen any Boost Inflation Now buttons, fortunately, but helping the economy by increasing inflation is the dumbest idea since negative interest rates. Given the Fed’s recent history, that may be its appeal. (more…)

Wages Will Increase When Productivity Does

Monday, March 28th, 2016

There are three things we can say about income with a degree of certainty:

  1. You’re earning less than you did before the financial crisis.
  2. You are overdue for a raise.
  3. You are unlikely to get a raise anytime soon.

If these three statements fit your personal circumstances, you can take some consolation in knowing that you are not alone and that there is likely not much you can do about it.  Using the financial crisis that began in 2007 as a baseline, the Economic Policy Institute found that wages have dropped by an average of up to 5.9%, depending on the category of worker to which you belong. Employees with advanced degrees are the only group that didn’t see its income drop, but that group didn’t see its income rise, either. declining-wages

While the rate of inflation has been low throughout that period, it is still eroding your purchasing power and affecting your standard of living.

Why is income lower today than it was in 2007?

Lower Profits.  A major reason you’re earning less—and why you’re unlikely to get a raise anytime soon—is that your employer is earning less. (more…)

Show Us the Money

Thursday, October 15th, 2015

The bright spot in this limp recovery has been the unemployment rate, which has fallen to 5.1%.  But don’t look too closely, or you’ll notice that the spot is not so bright.  In fact, the job market is no better than the rate of productivity, growth in gross domestic product (GDP) or numerous other depressingly underwhelming economic factors.

We’ve frequently pointed out that the oft-cited U-3 unemployment rate is meaningless, as the more people give up looking for work, the lower the rate goes.  Can anyone but a government economist think it’s a good thing when the unemployment rate goes down because millions of Americans have stopped looking for work?

A growing number of people – including, we hope, some presidential candidates – seem to be noticing that the labor force participation rate hasn’t been this low since Jimmy Carter was president.  It’s now dropped to 62.7%, a level not seen since February 1978.

But there’s another factor that demonstrates the weakness of the unemployment stats – personal income.Money

A Wall Street Journal commentary by Bob Funk, CEO of Express Employment Professionals, notes that, “There is something that the numbers are missing.  Economics — and logic — tells us that if unemployment was truly that low … wages would be rising.  Instead, wages grew at 0.2% during the second quarter, the slowest rate in 33 years.  The median family income in America is approximately $53,000, below where it was before the 2008 economic meltdown.” (more…)

How To Retire Early – Part One

Monday, June 29th, 2015

How would you like to retire early?  Maybe 62 is a good age or maybe you’d like to retire at 60 or even 55.

But unless you’ve won the lottery, have a government pension, or are the favorite niece or nephew of a rich uncle, you may find it difficult to achieve your goal.  If can still be done, though.  You have two options: cut your expenses or increase your retirement savings.  Better yet, do both.Retirement 1

More specifically, you should be able to take that job and shove it at an age earlier than 65 if you do the following:

Cut back on your expenses.  Even people who think they’re living frugally usually aren’t.  How often do you dine out?  Do you stop for coffee on your way to work?  What do you spend on hair stylists, clothing, manicures and pedicures?  Do you do your own landscaping and mow your own lawn?

Non-essential expenses add up.  Review everything you spend and make a cost-benefit analysis.  Determine whether the convenience and pleasure you derive from your expenses is worth the investment.  Maybe Two-Buck Chuck is no substitute for your favorite Côtes du Rhône, but would you rather drink good wine or retire early?  You may not be able to do both.  (more…)

Appearance vs. Reality

Monday, April 6th, 2015

Maybe if the good news about the U.S. economy gets repeated often enough, appearance will become reality.

We’re not there yet.

The official word from the U.S. Bureau of Labor Statistics is that the unemployment rate has been cut nearly in half, from a double-digit 10% in October 2009 to just 5.5% today.  As the chart shows, unemployment has been steadily falling and, given today’s improving economy it should continue to fall.  So all is good, right?

Appearance

Appearance

 

Not really.  Even CNBC, which is not exactly an anti-government media outlet, has caught on that the U-3 rate is bogus.

CNBC wrote that, “A number of economists look past the ‘main’ unemployment rate to a different figure the Bureau of Labor Statistics calls ‘U-6,’ which it defines as ‘total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers.’ ”

In other words, the U-6 rate is what any sane individual would consider to be the real unemployment rate.

(more…)

Another Clunker

Friday, March 1st, 2013

It’s like “Cash for Clunkers,” only for consumers.

You may remember that brilliant piece of Congressional economic planning, where an effort was made to boost auto sales by creating an incentive for consumers to trade in their old, environmentally suspect clunkers for new, higher mileage models.

“Cash for Clunkers” did, indeed, boost auto sales. Until the program stopped, at which time sales plummeted. Side effects included rising auto prices, a $3 billion cost to taxpayers and a negative impact on the environment, since many of the 690,000 vehicles traded in were shredded, not recycled.

Today’s equivalent is the tax increase that took place Jan. 1 to avoid the fiscal cliff.

Exuberance was abundant when economic data for December showed a rise in personal savings. Yet the exuberance turned out to be irrational; much like the initial glee over rising sales during “Cash for Clunkers.”

(more…)