Dollar stores in million dollar neighborhoods. 99 Cents Store looking at Beverly Hills location in rise of the low-wage and high-wage economy. 1 out of 4 working Americans in low-wage work.
Whenever a jobs report comes out I always ask what kind of jobs are being added. There is a wide gap between skilled and unskilled labor building in this economy. Those without the skills for select fields are being left behind to pickup jobs in the growing low-wage service sector. It used to be the case that blue collar work with one paycheck was enough to pursue the American Dream. That is definitely no longer the case. We have 50 percent of college graduates under 25 working in jobs that do not require a college degree or are simply unemployed. What we are seeing is a persistent trend that is creating a low-wage economy. The system is learning how to work around this ongoing trend. We now have a solid expansion of dollar stores catering to low income Americans. Dollar stores are also popping up in unlikely locations. That business is booming with 1 out of 7 Americans now receiving food assistance. The US has a large portion of our population working in low-wage jobs.
European Union reaches highest unemployment rate since crisis started – Spain hits 25 percent unemployment rate for first time. The missing EU crisis headlines.
During the height of the US Great Depression, the unemployment rate stood at 25 percent. This was a devastating experience for our economy and shifted policies and geopolitics for decades to come. So when you have the European Union, the world’s largest trading bloc with two countries experiencing unemployment rates of 25 percent people should be paying more attention. The unemployment rate in Spain for the first time hit the 25 percent mark last month. The figures are more troubling when you dig deeper into the data. Greece is also facing tough economic times. At the core of the crisis is the subject matter of too much debt. Spain is pulling back from a busted housing bubble and Greece is dealing with massive debt-to-GDP ratios. We trade heavily with the EU so what happens in Europe is bound to have an impact in the US. Is the crisis in Europe solved?
A debt inspired milestone – US Public Debt to GDP ratio over 102 percent. In the early 1980s public debt grew at one point by 20 percent. We hit that point in the 2000s yet GDP did not come along.
What is the significance of having too much debt? Does it even matter? It seems that politicians understand something must be done but while the bickering occurs, the status quo remains. We recently surpassed a milestone when it comes to our debt. Total US Public Debt to GDP now stands at over 100 percent. That is, we have a larger public debt than what we produce per year as an entire nation. The last time this occurred was during World War II. Europe is dealing with massive debt as well and many countries within the union are in depressions like Spain and Greece. There now seems to be a marginal impact on the real economy with every increase in the public debt. There isn’t a fast rule of thumb as to what is the maximum level of debt but going over 100 percent of our GDP is not exactly a good starting point.
Young, educated, and deep in debt – College debt over 18 percent of all consumer debt. Half of college graduates under 25 are unemployed or working in a field where no degree is required.
I doubt anyone is opposed to education or advancing your knowledge in life. Who can oppose something so valuable? Now this lofty aspiration is great but becomes problematic especially when the cost of higher education has gotten so expensive. How expensive you ask? The fact that we have over $1 trillion in student loans outstanding tells us many students can only continue their educational endeavors via more debt. One of the most disturbing statistics is regarding young college graduates. These are students that have faced the highest tuition inflation and are also entering the weakest job market in a generation. This is an issue that cannot be ignored. Sure, we can turn a blind eye as we did with housing but this bubble is going to burst. We are already seeing fractures in the system and even people questioning the value of an education. Where do we go from here with the US college system?
False prosperity through debt – 4 out of 10 Americans have less than $500. The dangers of building a consumption based nation.
If most Americans had to choose between saving and spending, they would decide to join the spending team. Americans are so drawn to spending that they will even purchase items they cannot afford. Another recent survey found that 40 percent of Americans have less than $500 saved. This aligns with a survey we found last year stating one out of every three Americans has nearly no savings. How is it possible that in the most prosperous nation in the world that we have an addiction to spending but also financing this spending through incredibly high levels of debt? We are reaching a level of peak debt for our nation and it is understandable that we cannot continue on this path. Of course platitudes and lip service abound but a national debt of over $16 trillion reflects a nation willing to go into massive debt to keep the dance going for a few more hours.
Inflation by any other name – Rising rents have pushed up the CPI to highest monthly change in three years. Shifting the Fed bailouts onto the working class and poor.
The Consumer Price Index (CPI) attempts to measure the change in price for a basket of American goods and services. I say attempts because measures like the “owner’s equivalent of rent” are simply an estimation as to what a home owner’s place would rent for. In the early 2000s with home prices surging, it missed a glaring trend that a place that would rent for say $1,000 was now costing the home owner $2,000. This was missed and the data understated this important fact. Since housing is the biggest line item for Americans and the CPI is heavily relied upon, many just assumed overall inflation was “healthy” during this time. Today we are facing a situation very similar to stagflation where unemployment remains elevated while the standard of living decreases. Those that claim inflation is nonexistent or healthy point to the CPI but ignore the headwinds that are starting to emerge. The last two months have seen the biggest increase in the CPI since the middle of 2009.
The math on US income – if you call something the middle make sure you are using math. The surprising details on median household income and per capita wages.
People have a hard time wrapping their minds around household and personal income. It is an easy enough concept to understand but some throw around terminology that confuses the facts. For example $250,000 is not middle class income if we define it from a strictly mathematical model. The median household income in the US is $50,500. In other words, half make more than $50,000 and half make less. If you as an individual made more than $250,000 that would put you in the top one percent of all earners in the US. For households making more than $250,000 per year this would put you in the top two percent of US households. Let us look at the income data carefully.