Friday, June 7, 2013

NATION: US Economic Recovery is Feeble...

...That's right. Do NOT believe what you hear and read. Instead, go with the economic data. [Note: *** below indicates an update in this topic.

Labor Force Participation Rate: Did you notice that the media has stopped reporting the unemployment in California in the nation? When's the last time you saw an unemployment rate in the news or in a newspaper? A better statistic for employment is the Employment-to-Population-Ratio, which is currently lower than it should be. This statistic is also known as the Labor Force Participation rate, which currently stands at 63.4%, which is at or near the lowest it has been since 2003, when it averaged around 66.5%. 
***As Goldman notes in Barrons 6/24/13 edition on page 8, "the relevance of a falling jobless rate while labor force participation rates are at historic lows is dubious."

Unemployment Rate: May 2013 saw an increase in the national unemployment rate to 7.6%, primarily due to the fact that more people started looking for work. The fed has previously announced that it will continue to stimulate the economy with bond purchase until the unemployment rate hits 6.5%, which looks like it will not happen for a while. The California Unemployment rate stands at 9.0% as of May 17, 2013, according to the California EDD. The Calif. rate was extracted from a Federal Survey of 5,500 househoulds (generally, the most accurate source of unemployment data). 
***Tribune 6/22/13: The California unemployment rate now stands at 8.6% - its lowest level since Nov. 2008. It is now only 1% higher than the national average, and is down from the highs throughout 2010 of about 12.5%. Calif. still has the 6th highest state unemployment rate in the nation. These results can be deceiving, as all of this gain has come from the self-employed, and represents people with no job prospects opening up their own business in hopes of bring in some cash. 
***Our personal experience is that many folks who have lost jobs in SLO have done just that: opened a consulting "business" until they find another job. In the meantime, their consulting "business" keeps their resume from having a gap, and gives them something to do every day, whether they are making money or not.

Household Wealth Recovery: The average American household has only recovered about 63% of the wealth it lost to the so-called "Great Recession" of 2007. However, the nation as a whole has regained all of the wealth that was lost during the Great Recession, due to higher stock and real estate price appreciation of the wealthiest 10% of households. A few informative articles on the topic: 
US Households Have a Long Way to Go (Tribune, 6/7/2013).
US Gains Wealth - but Not Equally (Tribune, 6/6/2013).

Shrinking American Wages: Average American wages have been dropping over the last several years. Between Sept. 2011 and Sept. 2012, real wages have dropped 1.1% (the most recent data available). Since 1978, year-over-year wages have declined only 6 times, and 4 of those have occurred since 2009. Most economists attribute this drop to increased international attention. Similar decreases are occurring in other first world countries, such as Japan and Europe, as well. However, wages in third world countries such as China and Brazil have tripled in the last decade. Read more here:
The Incredible Shrinking American Wage (Tribune, 6/5/2013).

Entry Level Jobs: These are hard to come by in this economy, even for those with a college degree. I believe it is largely because the middle class, middle-aged workers have been downwardly mobile and have taken most of the entry level jobs, thus leaving nothing for those in their 20's. Many highly qualified recent college grads are working in job well below their skill levels, just to get by. We hope that this situation improves soon, as we have 1 son who will be graduating from UC Santa Barbara in 2 years, and will need one of those entry level jobs! 

Stock Market vs. Economy Myth: If the US stock market is doing well, then so is the economy, right? Wrong! You can read more here at About.com. The US stock market has performed well, despite a weak economic recovery. This is largely because large corporations (which make up the entire US stock market) have aggressively reigned in costs and maximized profits, thus driving the market higher, while at the same time, minimizing employment opportunities for the low and middle class worker. 

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