Archive for February, 2014

Unemployment Rate – Why It’s Important to Look Past the Numbers of the Unemployment Rate

Saturday, February 22nd, 2014

Looking Past the Numbers

More than ever before people need a way to get ahead. Following record highs in the Dow Jones and the S&P 500 in September the markets experience a slide in October. That didn’t stop economists from proclaiming, “The American economy is back.” Based on news that the international monetary fund believes the United States will have one of the fastest-growing advanced economies in 2015.

With inflation rates hovering around 2% there’s no sign the Federal Reserve will increase interest rates, and large corporations seem poised to take advantage of these favorable conditions. By most accounts, the economy seems to be in a great position to move forward. Why then, with all of that good news, aren’t more people upbeat about the economy?

Even when stock prices were soaring in September stock ownership was at an 18 year low. So while high stock prices seem encouraging, a strong market will for the most part only be helping those who are already well-off. For the average American the “little guy” and “gal” the great recession hasn’t been followed by a great recovery to match. And when you dig a little deeper into the numbers, you’ll see why more than ever before families are desperately looking for ways to get ahead.

Growing Disparity

In its September 2014 bulletin, the US Federal Reserve presented results from its survey of consumer finances which measures how consumer finances have changed over the previous three years. If you were in the top 10% of income earners in the United States, the news was tolerable. Your earnings went up 2% on average keeping up with inflation.

But for everyone else, and particularly the lower class, the news was far from encouraging “only families at the top of the income distribution saw widespread income gains between 2010 and 2013,” the Fed bulletin said “Overall median income fell 5% between 2010 and 2013 from $49,000-$46,700.”

Harvard business school drew a similar conclusion from the results of its alumni survey on US competitiveness, “Our report on the findings focuses on a troubling divergence in the American economy,”the authors wrote. “Large and midsize firms have rallied strongly from the great recession and highly skilled individuals are prospering. But middle and working-class citizens are struggling as are small businesses.” Even Fed chairwoman Janet Yellen in a speech last month pointed to “widening inequality “as one of her greatest concerns about the economy.

Though a person’s odds of getting ahead haven’t really changed in decades, the chasms across from poverty to wealth is getting wider and more daunting. People in the lower-class are running out of realistic options for making that leap.

-5% is how much the median US income fell from 2010 two 2013
+11% the percentage increase of those 55 and older who are staying in the workforce today compared with 1992
11.7% of US families own private businesses. The LOWEST percentage since 1989
63% is workforce participation. The lowest rate since the 70s.

Punching the Clock

You might have seen the news about the unemployment rate, which has normalized from 10% in 2009 to 5.9% in this Fall. But the story buried beneath the headlines is that the unemployment rate is dropping not because more people are employed, but because more people are choosing not to keep looking for work! The work force participation rate which measures the number of eligible people who are choosing to work, is now at the lowest it’s been since the 1970s at 62.8%. It gets even more interesting when you break down the demographics of who is and who isn’t working. You might think the lower numbers result from Baby Boomers taking early retirement, but that doesn’t appear to be the case. The percentage of those 55 years and older who are still working has actually risen from 29.3% in January 1992 to 40.3%.