Jan 24 2015

Profits of doom: For-profit colleges are the resurrection of subprime mortgage lenders for the college industry.

At a time when the cost of a college education is being thoroughly questioned, there is one area we should all agree on.  For-profit colleges are largely a distraction to fixing our higher education system and operate as the subprime lenders in college education.  For-profit colleges claim they are trying to provide an education to those shunned from the traditional college system.  But this twisted logic was also used in the subprime fiasco.  What good is it giving someone a $500,000 loan on a home when they make $25,000 per year?  By the time the loan unravels healthy commissions were made and the financial disaster cleanup is left to tax payers and those taking on the loan.  If for-profit education was such an obvious deal, why did the industry spend $4.2 billion in marketing in 2009?  For-profit colleges provide low quality education with an incredibly high sticker cost that is financed by a lifetime of student debt.  If we are serious about tackling the student debt problem we need to first address the for-profit education system.

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Jan 20 2015

When working leads to food stamp usage and the rise of dollar stores: Food stamp usage is still near record levels even in the face of a dropping unemployment rate.

Food stamp usage surges when the economy enters into a recession.  That is no surprise.  In fact, this is the design of the program.  A safety net when things get bad.  But if we are to believe headline indicators, the economy is improving so we should see food stamp usage decline substantially.  It has not.  Thanks to the low wage recovery, you have a new class of working poor.  We still have an incredibly high number of Americans on food stamps as we start 2015.  Dollar stores have done a great job capitalizing on this army of people needing low cost items to buy.  Instead of selling trivial junk, many dollar stores now make most of their volume through food sales.  Working and being on food stamps doesn’t seem like a perfect combination but it is if you are one of the millions in the low wage economy.  As we will highlight in this article, we are finding a high number of Americans unable to dig themselves out of the hole set from the Great Recession.

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Jan 17 2015

The minimum wage economic recovery – 44 percent of jobs added since recession ended come from low-wage industries paying $10 an hour or less.

This has been a disjointed economic recovery.  Most Americans are hearing about this Wall Street party yet look at their paychecks and wonder when the party is going arrive in their neighborhood.  Looking back at the 2001 recession, the recovery during that time came largely by adding higher paying employment.  That is not the case with the Great Recession.  The largest segment of jobs being added are coming from lower-wage industries.  What does that mean?  It means the bulk of jobs being found by Americans are paying $10 an hour or less with Spartan benefits.  Given that inflation is hitting and wages are stagnant, more money is being taken away once that net income hits your bank account.  Lower gas prices are a drop in the bucket when you look at the rise in home prices and rents driven by Wall Street buying.  Shelter is the biggest expense for Americans.  With this moving up and incomes stagnant, more money is flowing into the pockets of banks while working class Americans (a growing group) are largely living paycheck to paycheck.  Let us take a look at where the jobs are being added in the aftermath of the Great Recession.

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Jan 15 2015

Which state has half of its eligible adults not working? The dismal employment participation rate across the United States.

People have a hard time wrapping their minds around the fact that 93 million Americans are not in the labor.  In December alone we added over 451,000 to this category.  Much of this figure comes from people retiring and those simply not eligible to work but there is a disturbingly large number of people that are eligible for work and are simply lacking a job.  There seems to be a perception that all of the people hitting retirement age are somehow prepared to weather the years of older age with a sizable nest egg.  Nothing could be further from the truth.  Half of older Americans would be out on the streets if it were not for Social Security.  The participation rate tells us a different story regarding the economy.  It is telling that for the first time in the history of the Labor Department’s tracking of this metric that one state actually has half of its adult population not participating in the labor force.

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Jan 13 2015

Only 4 out of 10 Americans has enough in their savings to pay for an unexpected expense: Half of the country is living paycheck to paycheck with no retirement plans.

There is little motivation to save when your local bank is offering close to zero percent on your savings account. And most Americans simply do not invest in the stock market. When it comes to saving money it is crucial to get into the habit of putting funds away for unforeseen events and expenses. Life has a way of bringing on unexpected expenses. The transmission falls apart, an unexpected illness, or having the roof blown off during a storm. All of these cause short-term disruptions to your balance sheet. Contrary to what the media portrays, most Americans are horrible savers. In fact, only 4 out of 10 Americans have enough in their savings accounts to pay for an unexpected expense. So it should also come as no surprise that half this country is not adequately preparing for retirement and will be depend on Social Security as their main, and for many only source of income in old age. Why do Americans save so little?

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Jan 10 2015

Record 93 million Americans now not in the labor force: The non-working American recovery added 451,000 to the not in the labor force category in December alone.

The employment report came out today and what you would take as good news sent the market moving lower.  Why?  A large number of the jobs added were in retail and food services.  The growth in low wage employment caused the overall wage level to dip.  But what was more telling and what continues to be ignored by the press is that we now have nearly 93 million Americans in the “not in the labor force” category.  In December alone this category surged by 451,000.  The market turned sour on a variety of fronts but the labor force participation rate also took a tumble.  The spin is that we have many people hitting retirement age and many are going into the sun with large nest eggs.  But the reality is, most older Americans are relying on Social Security to keep them one step away from poverty.  We just hit a new record for those not in the labor force.

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Jan 6 2015

The American Dream no longer involves owning a home: Record number of young living at home and rents increase while income falls.

Inflation is an insidious money grabber. When incomes are stagnant or falling, any tiny amount of inflation is tantamount to a wage a cut. The largest expense for Americans is housing payments. This can be in the form of rent paid to a landlord or mortgages paid to a bank. Either way, money is getting funneled out for shelter. While incomes have been stagnant, rents have been soaring and the number of households renting has surged thanks to banks crowding out regular families in the single family home market. Wall Street has been chasing yield and thanks to generous bailout policies, the American public is subsidizing this low rate environment on the backs of this debt fueled low wage recovery. Many Americans are now sour to the notion of owning a home. How many young adults lost their homes or saw their parents struggle to make the monthly mortgage payment? The mindless banter of “housing never goes down” is now lost on this current generation. What is interesting is that home values have gone up, rents have gone up, but the overall homeownership rate has fallen in line with incomes. And of course, rents are being jacked up while incomes flutter.

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