This chart is daunting:

The amount of people that are long-term unemployed is at record levels.  The chart above shows that we have never been close to a similar situation going back to the late 1940s when records started being kept.  These are structural problems.  Nearly 7 million of the officially unemployed today have been out of work for 27 weeks or more.  The working and middle class saddled with incredible amounts of debt are losing any ability to stay above water.  This is why we see those jumping on food assistance exploding even at a faster rate than those losing their jobs.  Why?  We have a giant class of working poor in the United States.

9 of the top 10 industries in the United States are low paying service sector work:

Source:  BLS

There are many Americans that are actually counted as officially employed but are also receiving food assistance.  Think about the data for a second:

People receiving food assistance:                             40.4 million

Official unemployed:                                                      14.6 million

Part of the gap comes from the data of counting children in the food assistance figures.  Yet many people today are labeled as fully employed but are barely scraping by.  The median household income in the U.S. is roughly $52,000 – I’m sure this figure is lower or stagnant once data is released in September from the Census.  The economy is extremely weak for certain sectors.  If we crunch the data on the long-term unemployed future prospects do not look promising:

What does the above chart tell us?  The above chart shows very little recovery going on in the real economy.  Those that stay unemployed 27 weeks or more are likely to stay that way for a long period of time.  Now if we really want to see where things are heading, we can look at a few major sectors of our economy:

What you’ll notice in the chart above is that the manufacturing sector in the U.S. has been taken apart and this goes back to the 1970s.  These were quality jobs that are not coming back.  If you take a look at the actual FIRE side of things (finance, insurance, and real estate) job losses are showing up in good numbers but this sector has gone up on a very clear path since the 1950s.  We have decided to push real estate and toxic loan products instead of making things.  The banking sector has outsourced our workforce.  Why else are the top 10 job sectors in low paying service sector work like cashiers or servers?  This correlation did not happen by accident.

The government has been adding jobs over this time:

You really don’t want to see the government sector expanding at the same time the overall employment base is going lower.  Yet this recession is striking at the core of the working and middle class.  There was a recent story of a city manager in Bell California making $800,000 a year in a city of roughly 30,000 people.  The city is working class and people are rightfully outraged.  This is no different than a CEO making millions of dollars creating toxic mortgage products that required taxpayers to bail them out.  The country is being run by plutocrats on both sides of the aisle.  The middle is getting squeezed out.

It is no wonder that anger against both political parties is at record levels.  People are rightfully disenfranchised.  With no solid job growth we can expect further problems in many sectors of our economy and we will see even more incredible financial problems come to the surface that were hidden during the halcyon days of the credit bubble.  When the light comes on, the roaches scatter.

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There is little to doubt where the trend is heading.  Even from 2000, this number has been increasing showing that the supposed boom was nothing more than smoke and mirrors fueled by Wall Street debt:

Source:  Food and Nutrition Service

You’ll notice that starting in 2000, the number of people on SNAP has gone up exponentially.  Last year the government provided $53 billion in food assistance (compare this to $17 billion in 2000, a tripling of cost in a decade).  Most of these Americans do not want to be on food assistance.  If anything, the above chart is a clear indicator of how the economy is feeling for millions outside of the Wall Street boom.  When we hear about thousands of people lining up at Wal-Mart just before midnight so they can enter and shop with their newly charged debit card, we know that something is amiss between Main Street and Wall Street.

Now some people would argue with the cost.  But $53 billion going to 40 million Americans makes more sense than giving a handout to Goldman Sachs just so they can increase their bonus pool.  Plus $53 billion is a drop in the bucket compared to the $13 trillion given to Wall Street.  You also have to remember that most of this money is being spent right back into the economy.  It isn’t like these folks are using the funds to pay for their Manhattan apartment or go purchase another yacht with the name of “Big Spender.”  On Wall Street all is well even though we are adding nearly a half million Americans each month to the food assistance program.  Apparently an economic recovery means a booming economy for everyone but the poor and middle class.

Since more and more Americans now use “food stamps” more stores are changing to adapt to this new economic reality:

“(Consumerist) We’re going to have to start offering tips for shopping with food stamps now that a record number of consumers —and stores— are using them.

EBT use has increased 20% from last year and formerly reluctant retailers like Costco are getting in on the action.

The cards are so “popular” that some retailers are crediting them with their “success” in the current economy.”

This is a large reason why stores like Wal-Mart have seen better performance during the recession.  You might not go to Circuit City (now gone) to buy a surround sound system but you’ll definitely go shopping for food for your family.  I’m not sure how we can say we are in a recovery with 40 million Americans on food assistance.

And of course, this is only the other end of the employment equation.  We have 16.9 percent of our population that is underemployed.  And many of the working poor are dealing with smaller paychecks but with higher taxes and fees thanks to crony banks and corrupt politicians:

“(Rolling Stone) If you want to know what life in the Third World is like, just ask Lisa Pack, an administrative assistant who works in the roads and transportation department in Jefferson County, Alabama. Pack got rudely introduced to life in post-crisis America last August, when word came down that she and 1,000 of her fellow public employees would have to take a little unpaid vacation for a while. The county, it turned out, was more than $5 billion in debt — meaning that courthouses, jails and sheriff’s precincts had to be closed so that Wall Street banks could be paid.

As public services in and around Birmingham were stripped to the bone, Pack struggled to support her family on a weekly unemployment check of $260. Nearly a fourth of that went to pay for her health insurance, which the county no longer covered. She also fielded calls from laid-off co-workers who had it even tougher. “I’d be on the phone sometimes until two in the morning,” she says. “I had to talk more than one person out of suicide. For some of the men supporting families, it was so hard — foreclosure, bankruptcy. I’d go to bed at night, and I’d be in tears.”

The recovery is invisible for the vast majority of Americans.  Most don’t derive their income from the Wall Street casino but from actual work.  They get their money from actually working instead of selling toxic investment products to siphon off money from the productive economy.  If we look at personal income the rate of change has fallen for decades but only this recession put us into the negative realm:

Until average Americans are protected from the Wall Street gamblers, we can expect this Brazilian split in America.  We used to have three economic classes; the poor, a large and healthy middle class, and a small elite.  Today, we are seeing the category of poor exploding while the middle class category shrinks and the wealthy remain the same but with more resources.  No wonder why this recovery is invisible to many.

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Food Stamps

Nearly 37 million Americans are on some form of food assistance, the largest percentage on record.  It is hard to argue with food stamp data since these are usually allocated to Americans who can least afford any bumps in their income.  They are simply trying to meet the basic necessities of daily life.  That is why we have heard multiple stories of people waiting until the clock strikes midnight so they can begin shopping at Wal-Mart for food.  It is also the case that those at the bottom of our economic ladder are usually the first to be let go when recessions hits.  The unemployment rate for those with a college degree is 5 percent while those with no college education have a rate of 15 percent.  If we dig deeper, only 1 out 4 Americans have a bachelor’s degree so the average American has none to little college education and thus makes it harder to compete in the current troubled workforce.

I’ve seen many reports were schools, companies, and even households have cut back on manual labor positions which are usually very low paying.  This is one of the primary reasons why those at the bottom are seeing such crushing blows in this recession.  The above data tells us a very different story from what is happening on Wall Street.

There is also a financial cost to this:

Last year $37 billion was spent on food stamps.  This year we are going to be solidly over $40 billion (possibly $45 billion).

Bankruptcy

There are few things more painful than bankruptcy.  Bankruptcy is largely a disappearing middle class phenomenon.  Whereas with food stamps, you have to have virtually zero in assets with bankruptcy it is expected that you have something that you are filing bankruptcy against.  In many cases this is crushing debt from credit cards and other consumer loans but now, a large number of bankruptcy is now caused by the popping housing bubble.  Bankruptcy filings are typically the end of the line for many Americans.  They no longer can sustain their payments and have to file.  In 85 percent of the cases there is “no-asset” for creditors to go after.  This number is very high contrary to what is happening on Wall Street.

Credit Access

Americans have come to rely on their credit cards as if they were part of their monthly budget.  No longer just a convenience product it has become the payment option of choice.  It also made it easier for people to spend beyond their means because credit card companies understand human nature.  Well that is now coming back to hit many people including credit card companies.  But unlike the credit card companies, the average American doesn’t have access to unlimited funds from the U.S. Treasury and Federal Reserve.

During the peak, Americans came close to touching $1 trillion in credit card debt.  That number has now fallen to approximately $890 billion due to defaults and credit card companies simply removing access to credit in the marketplace.  Yet this pinch is hurting Americans in the short run.  Many of us will agree that many spent beyond their means.  Yet the hypocrisy that we are seeing is that banks are not needing to cut back because of their taxpayer bailout while they expect customers to tighten their belts.  It is the ultimate double standard but it shows who is running the show in D.C.

The fact that credit card companies are now adding onerous terms and traps for good paying customers shows how desperate they are to milk every last penny from the average American.

Unemployment and Hiring

If you look at the latest data from Gallup, employers are hiring and firing at the same rate as in March of this year when it seemed the entire world was flying off a cliff.  Yet today, we are still seeing the exact same numbers.  The fact that there are 6 Americans for every 1 job opening shows that the employment situation is still deep in the hole.  Without hiring or job growth, how are we to expect and sustainable recovery.  Things have gotten so bad that people cheer simply because the unemployment rate didn’t go up.  Too bad they ignore discouraged workers or part-time workers but that is of no consequence to the Wall Street crowd.

Until hiring picks up, the employment situation is still going to feel miserable.

Housing

And finally, the last piece we will look at in our misery index is monthly foreclosure filings.  Even with every kind of bailout and government assistance, monthly foreclosure filings are still near their peak.  It is hard to make any housing payment without a job, moratorium or no moratorium.  And that is largely a problem of how we attacked this problem.  It was assumed that if you fixed the banks and housing, all else would be fine.  But the banks only wanted to fix housing because that is where their money and leverage was.  They didn’t care about job growth.  In fact, if employment was solid and wages hadn’t been stagnant for a decade then higher home prices would have made sense.  Yet higher home prices merely because of higher bank leverage was the ultimate recipe for disaster.  The average American is now paying this bill by losing their home and bailing out Wall Street.  A two hit combo.

Until overall foreclosures begin decreasing, many are still going to deal with the burden of too much debt on homes that are worth less than they once were.

When we look at these five sectors most directly linked to Americans, you can see why there is very little to any recovery.  Unless you only care about the stock markets we have much to fix before we can issue a recovery statement.  The facts are very different from what is coming from Wall Street and D.C.

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The problem we currently face is even after the global economy was brought to its knees by the current Wall Street banking structure, things still haven’t changed at the core of their mission.  The same banks are back taking inordinate amounts of risk with the now explicit backing of the U.S. Taxpayer.  It is no surprise then that our U.S. dollar has been pummeled by the policies of the Federal Reserve and U.S. Treasury.

Let us examine each component of the misery index.

Bankruptcies

Source:  Credit Slips

It shouldn’t come as a surprise that bankruptcy filings are now approaching their pre-2005 levels.  Keep in mind that in 2005, tough bankruptcy legislation came into effect thus spurring a massive wave of bankruptcies from people seeking to avoid the new tougher standards.  Even with these new standards in place, there is only so much blood that you can squeeze out of a turnip.  Some will be quick to point out that bankruptcy filings hurt big corporate giants mostly.  On the contrary, 98.5% of all bankruptcy filings come from individuals at the end of their rope.  Most people don’t file for bankruptcy with a smile on their face.

We will see a slowing or moderating pace for the fourth quarter since there is a bit of seasonality with filings.  But Q1 of 2010 should give us a better indicator of where things are heading.  But one thing is irrefutable, bankruptcy filings are going up.  In this category, the recovery is not taking place.

Food Stamps

Over 35,800,000 people are currently receiving food stamps in the U.S.  That is 11 percent of our entire population is receiving government assistance through the SNAP program (i.e., food stamps).  As the chart above can attest to, the number of people is still booming.  Obviously in any economic down turn, this rate will increase but this percentage is one of the highest on record.  It is also clear that the growth is currently exponential.

Here is the government expenditure per year on food stamps:

2006:     $30.6 billion

2007:     $30.3 billion

2008:     $34.6 billion

2009:  $40 billion (still need August and September data – average out we are approaching $50 billion for 2009)

Just think of how quickly this number is jumping.  The problem with the current system is that some people are still governed by the trickle down school of economics.  They believe that if Wall Street is up 60 percent (thanks to government bailouts) that somehow crumbs will trickle down to working and middle class Americans.  Clearly it isn’t happening right now.  The recovery is looking more like a minor depression to many.

Long-term unemployed

It is telling that the biggest category of our currently unemployed population is those classified as long-term unemployed.  These are people that have been out of work for 27 weeks or more.  Think of how grueling it is to be out of work for half a year in this economic climate.  The issue at the core of long-term unemployment is that it reflects potential permanent job losses.  That is, many of the 8,000,000 jobs lost since the recession started are never coming back.  For every one job opening you have six able bodied workers competing for it.

It is hard to see what industry is going to pick up the slack for these long-term unemployed.  Many are now coming to the end of their unemployment insurance and in many cases, in some states this can be as long as 90+ weeks.  The long-term unemployment trend tells us that we have yet to see any economic recovery as well.  Sure the stock market may be up but what use is that to the average American that pays most of their bills through a job?

Foreclosures

At the root of most of this is the housing market.  Take a long and close look at the chart above.  Q3 of 2009 was the worst foreclosure quarter on record.  Clearly foreclosures are not a sign of economic recovery but here we are, two years into the crisis and foreclosures are still at record levels.  Much of this comes from the decade long housing bubble.  But keep in mind each additional foreclosure is another home on the market, another family looking for different shelter, and an economic loss to the system.  It is hard to see any of the government stop-gap measures fixing this in the short-term.  The loan modification programs have yet to yield any significant change.

It is also the case that the government has gotten more risky with tax credits and allowing lax lending standards with FHA insured loans in getting more people to buy.  In the short run this may offer the appearance of growth but over the long haul, this will only add to future defaults.

The foreclosure numbers show us a very different picture from the current recovery rhetoric.

Credit Card Defaults

For the first time in data tracking history, has total revolving credit contracted on a year over year basis.  At a time when the above data shows that more Americans need more support, the credit card companies are yanking lines of credit.  They are also charging higher fees on good standing customers to make up for their rising defaults for years of easy financing.  Here is some sobering data:

Credit card direct mail offers:

Q3 of 2006:         2.1 billion

Q3 of 2009:         391 million

Now you know why your daily mail is much lighter.  Credit card companies who are giant receivers of taxpayer bailout money are actually closing their doors on the same people who are bailing them out.  They are hiking up fees and closing down credit lines unless consumers give in to their onerous ways.

The bottom line is the misery index shows no solid economic recovery.  I suppose it depends on what we are looking at if we want to say we are in a recovery.  If we are looking at banking profits and Wall Street then yes, the recovery is here.  If we are looking at other data like bankruptcies, unemployment or foreclosures then the story is very different.

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The raw data shows us that a stunning 12 percent of our entire population is receiving some form of food stamp assistance.  The program is now called Supplemental Nutrition Assistance Program but the theme is still the same.  Let us look at some of the raw data:

Source:  Sudden Debt

This is the highest percentage of Americans receiving food stamps since records started being kept back in 1969.  The average person receiving assistance now receives $133 per month but even a number this low with such a high number of participants is costing the government $56 billion on an annualized basis.

Here are the top 5 states:

-1. Texas –                 3.068 million participants

-2. California -           2.99

-3. New York -           2.57

-4. Florida -                1.77

-5. Illinois -                1.71

What is telling with the data above is that Texas has 24 million people while California has 37 million yet Texas has more people receiving food stamps. Florida and Illinois have nearly the same amount of participants although Florida has 18 million people while Illinois has 13 million people.

When we look at food stamp participation we see the real pain in the economy.  I drive around many local areas in California.  In many lower to middle class areas you will see department store traffic down to levels unseen in decades.  Yet if you look at local dollar stores they are booming with traffic.  People are asking about tent cities or soup lines but some of the “hidden” pain is mitigated by people simply buying at lower priced stores.  After all, you can buy a loaf of bread, some sliced ham, a few cans of soup, and feed your family for a week.  Although this is living on the margins you won’t be starving either but might explain why we haven’t seen a gigantic jump in tent cities or soup lines.

Yet there is a significant jump in traffic to local charities and shelters as you would expect in any deep recession.  Those receiving food stamps will pump practically all the money back into the local economy.  With $133 a month there isn’t much you can do.  Yet it might be enough to provide a tiny buffer.  I can only imagine how our country would look like right now if there were no food stamps or unemployment insurance.  Can you imagine 35 million people out on the street in the United States of America?

Yet the stock market boosted by the U.S. Treasury and Federal Reserve is only helping the top bracket of our country.  Most Americans have seen their hours cut, wages slashed, and are dealing with declining housing prices and a smaller stock portfolio.  This is the reality on the ground.  If we look at the real unemployment rate we are approaching Great Depression levels:

The headline unemployment rate is 9.7 percent.  If we look at the government U-6 rate a broader and better indicator of the true employment situation we find that 16.8 percent of people are either unemployed or underemployed.  A more broader measure already shows the unemployment rate at 20 percent.  Some people have a hard time seeing this in action.  Take a look at Detroit that has an unemployment rate of 28.9 percent.  That is right, 28.9 percent of a city that once had 1.8 million people and was the hub of the automotive industry.

Even though the pundits and the Wall Street crowd are breathing happy in their custom made suits, the reality on the ground is very different.  Those collecting food stamps are only growing.  The unemployment rate is only moving up.  It is hard for most Americans to except the “lagging indicator” argument when we are breaking records left and right.  This is not your typical recession so why are we to expect that things will move out in a typical fashion?  Ask those 35 million Americans if they feel the recession is over.

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