Jul 8 2014

Feeling poorer through the power of inflation: Since January of 2000 college tuition is up 68 percent, new car costs are up 55 percent, your typical home is up 50 percent, and wages are simply not keeping up.

You have to love how the Federal Reserve downplays inflation when they are the primary source of it with other central bankers for this monetary phenomenon. They continue to play inflation down because it gives them the power to continue to use policies that seem to only aid their banking allies while making working Americans poorer by the day. Inflation has a slow eroding power that is not readily visible since it usually takes time to work through a system. Looking at a broader timeframe however it becomes readily apparent that inflation is hitting our system hard and most working families don’t need an advanced degree in economics to understand this. According to the CPI, the overall rate of inflation since January of 2000 has been 39 percent. The Fed prefers to use the PCE Deflator measure and this only has inflation running at a 31 percent rate. But when we actually look at the cost of goods and services across the spending spectrum we realize that inflation is very much alive and well with us.

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Jul 5 2014

Being young increases your odds of being unemployed in the US: 40 percent of unemployed workers are Millennials. The long-term impact of young unemployment.

Young Americans continue to carry a heavy burden brought on by the Great Recession. A recent analysis conducted on US Census data found that 40 percent of unemployed workers are Millennials. Many young workers are simply trying to start their careers and each year that passes is a year where retirement planning is delayed, savings are put on the shelf, and the machinery of spending is put on ice. Young Americans are a key spending demographic. Many will look to purchase their first home. Many are out in the market to purchase cars. Vacations and spending are common characteristics of this group assuming they have the money to spend. Unfortunately with such a large portion of our unemployed coming from the young, we are seeing new demographic trends hitting the market. The housing market is seeing a smaller number of first time home buyers in spite of very low mortgage interest rates. Many are saddled with back breaking levels of student debt and default rates are highest among this debt class. In the US, being young increases your odds of being unemployed.

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Jul 3 2014

Part-time working nation: The number of people working part-time for economic reasons jumped by 275,000 in the latest month of data. 6.1 million Americans not in the labor but want a job now.

The jobs report always comes out like a Black Box of economic data. While we added 288,000 jobs on the surface, digging deeper into the report we find that part-time work for economic reasons increased by 275,000 in the same month. Year-over-year inflation is eating away at purchasing power. The employment report was actually weak but on the surface one of the stronger reports we have had since the Great Recession ended. What is more troubling however, is the report is showing that the nation is settling into a comfortable zone where low wage jobs are becoming a more common part of economy. What also isn’t mentioned is that we have over 6.1 million Americans not in the labor force but that want a job right now. We’ve discussed the “not in the labor force” category before but this subset is very specific and shows that finding a job in the economy today isn’t all that easy, especially one that pays a livable wage. The stock market of course makes a record while other indicators like food stamp usage remain near peaks as well. Working part-time is becoming a much bigger part of our workforce.

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Jul 1 2014

Opting out of the workforce: Federal disability payments and the rise of those not in the labor force. Since 2000, those on federal disability insurance are up 66 percent while population is up 13 percent.

The number of Americans receiving federal disability payments has doubled in recent decades. One reason for this is the aging of our workforce and the reality that with older age, more health problems occur. This only explains part of it. There is evidence that 40 to 60 percent of the recent rise has to do with structural issues where those in low wage employment sectors simply opt out of the labor force via federal disability payments. It shouldn’t be shocking when you realize that the typical American worker takes home about $27,000 per year. For example, in 2000 we had about 6.6 million Americans on disability insurance. Today it is close to 11 million, a rise of 66 percent while the population increased roughly 13 percent. Something more than old age is contributing to this massive jump in federal disability payments. With a large low wage employment sector, you simply have more people opting to not work instead of earning a very low wage. The estimates of 40 to 60 percent seem to be right given the major discrepancy between population growth and the rise of those on disability insurance. Unfortunately this is a trend that is appearing with our “not in the labor force” growth over the last decade. Many are simply opting out of the workforce.

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Jun 27 2014

Old, broke, and financially unprepared for retirement: Many older Americans are simply unprepared for the costs associated with retirement.

America is graying out. The massive cohort of baby boomers are now entering retirement age at a rate of close to 10,000 per day, or roughly 300,000 per month. Many are fully unprepared for the challenges associated with retiring and living a life where work income becomes a smaller source of support. The workforce during the last decade has added many lower wage jobs and this has added to the challenges of adequately saving for retirement. Saving takes work, patience, and enough disposable income to stash away. The facts are simply disturbing here. Most Americans entering retirement will rely on Social Security as their primary source of income. Since Social Security payouts come from current workers, those young lower paid workers are going to face a growing burden. This is all documented yet many Americans are entering old age fully unprepared for the economic challenges they will face. Healthcare costs are soaring but so are food costs, energy prices, and housing costs and all of these will be eaten away if your fixed income does not keep up.

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Jun 24 2014

The chasm between the real economy and stock market: Baltic Dry Index down 60 percent and CNBC viewership near record lows. Where is the wealth in the US?

There is a continuing divide between the stock market and what is happening in the US economy. Many of the S&P 500 companies derive a large portion of their profits from growth abroad and many companies have increased their bottom-line by slashing wages, hours, and benefits domestically. Not exactly a plus for working and middle class Americans. It is also interesting to see that the Baltic Dry Index has fallen by 60 percent year-to-date and is now down near record lows. This index is important because it is a measure of what it costs to move raw materials across the seas. You would think that a booming economy would have a large need for raw materials and this would push shipping costs up. Obviously fuel is a big input for these operations so the near record low cost flies in the face of what is occurring in the stock market. We also know that inflation is hitting harder on the pocketbooks of most Americans even though the CPI appears relatively tame. There is a chasm between the stock market and what is happening in the real economy because the stock market is largely being driven by hot money and financial institutions that trade massive amounts of financial instruments while the public holds very little in true wealth. This is probably why today CNBC sees near record low viewership at a time when the stock market is near a peak.

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Jun 21 2014

The loud noise of inflation: Fed underplays current rise in inflation as noise while Americans see higher home prices, tuition, food costs, and energy prices.

It was interesting to hear the Federal Reserve mention that the higher than expected inflation numbers are merely noise. It is highly unlikely that most Americans feel the current rise in prices as noise. Inflation has a way of eating into every penny that you have especially when the market is flooded with debt. Just think of the price of items ten years ago and you will realize that practically everything has increased in cost including; housing, rents, college tuition, healthcare, food, and energy. It is also the case that wages have simply not kept up with price hikes. In other words, the cost of important items is trailing the growth of wages. What we have is a decline in the standard of living brought on by inflation. It happens slowly and many fail to realize it is happening. You see it over the last few years with banks flooding the housing market and crowding out regular families. The Fed has been the number one buyer of mortgage-backed securities and the repercussions are very noticeable in the housing market. The markets saw a stiff rise in commodities recently as people suddenly realize that the Fed is fully addicted to debt and is disconnected from what is happening with average families.

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