THIS IS MY 81ST BLOG ON UNDERSTANDING MONEY TOOLS
In this blog we are going to look at various information
that affects money and your employment. We mentioned in previous blogs that the
government manipulates figures/statistics to reflect an image that they desire
on the economy, however not totally the whole picture. This happens with both
the Democrats and Republicans, so the party in office is inconsequential. Also, we have mentioned that our
government measures many statistics differently than other countries, so
comparisons are impossible.
With that said, let’s face some issues, and contradict what
the government has published. After the economic reports for October came out
Chairman Yellen, of the Federal Reserve (yes, she is a woman and the position
is not gender differentiated), may raise interest rates soon, because
everything looks very favorable and job reports were excellent. There is
reportedly extremely low inflation, so that is not a problem, and a healthy
economy. Right?
As I have mentioned before, I farm some land in Wisconsin so
I went to the Wisconsin Farm Bureau to see if food prices including dairy have
gone up. Yup. They report food
prices are up 2.7% this year; that is inflation felt by everyone at the food
store. Here is what the government has to play with. They use at least three
measurements for inflation and only take measurements in larger urban centers.
Two of the measurements are the “Consumer Price Index” used as an index for
prices of consumer goods and services over a given time period and the
“Personal Consumption Expenditure”.
PCE is the measurement of consumer spending on goods and services, thus
directly related to GDP. Most of
the inflation and robust economy comes from the increase in drugs and the
health care industry, although food has played a part as noted above. It is not
an overall measure.
On the other hand here is a reality check. We are a world
economy. Japan, even with printing tons of new Yen, announced today
(11-16-2015) they are in a recession. Europe is a mess, along with other major
countries. Are we different? The employment number looked great for October,
but here is what you didn’t see. Older people, ages 55 and up accounted for
380,000 new jobs, men ages 25 to 54 lost approximately 120,000 jobs. I know
this doesn’t equate to what the government announced at 271,000 new jobs, but
it came to me from a reliable economic report; close enough. The latter age bracket is the higher
wage-earners who have families, and are the spenders. What does this mean? I am
going to assume that older people don’t have the means to retire so they
continue working at lower paying jobs, especially with the Holidays around the
corner for seasonal retail.
The new word being bantered around is the “Financialization”
of the USA and world. What is this?
It means that we are no longer an economic measurement of supply and
demand, however a governmentally manipulated instrument as an outcome from our
over zealous Keynesian Policies. Two distinct areas come to mind, one the printing
of a country’s money and two the holding down of interest rates not associated
to a free market policy. This doesn’t relate to goods, services and
employment. Goodbye middle class.
In history, every time the government tightened money supply or raised interest
rates the DOW Jones Industrial Averages went down. Will it be consistent in the
future?
This Financialization has forced a ton of money into world
stock markets. It has helped the wealthiest as 85% of all assets in the stock
markets are held by that group.
What has this done to our middle class worker and earnings here in the
USA? I looked up wages over the past 15 years and it is startling. All income
brackets except for the top 1% are down.
These are approximate, but here is what I came up with. The lower 20%
was hurt the most dropping 17%. As
you go up the income level the drop was less significant, but still
existed. Even the top 5% had a
drop in income, only the top 1% had incomes significantly rise. What shocked me
was that 72% of all US workers make less than $50,000 a year. How do you
support a family of four and have any money left over, or try to buy a home, or
have any savings for retirement?
Before people jump for joy over employment numbers they
should consider some of the variables such as part or full time employment,
W-2’d workers or 1099’d, wage level, seasonal employment, average age hiring,
benefits/no benefits and so much more.
With the October job numbers we added to a negative number; we went from
93 plus million Americans working age not in the work force to over 94 million.
These people are not contributing to the re-building of a better America or are
being shut out.
As so many people know, over 50% of young people under the
age of 25 are still living at home with their parents. They have tons of
student debt, putting off starting families, staying single, and trying to find
respectable employment. Even
“children” (excuse the pun) ages 18-34 represent 40% still living with parents.
Certain areas of the country continue to do well. One of the
best is Los Angeles. Wow, over $7 billion in new real estate development in
downtown, what is with that? $6 billion out of $7 billion is with Chinese
money, not the USA, and a lot of the profits will go back to China.
If you are looking at retail for employment it is industry
sensitive. Some of the biggest retailers are closing up stores; these including
Macy’s and Target.
Americans need to be more concerned about the quality of
life, long term, not short term.
The figures above don’t bode well for the long term.
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