There are two really ignorant statements that are repeatedly made by more than just a few. Today I would like to address those two statements with a little more than surface debate. Perhaps if you find yourself having a debate and someone says something along these lines, you will be able to retort with something a little extra.
So let’s get to it. Keep in mind that both of the ignorant statements I will share are actually connected and the retorts are as well. Some of this will rub a few of you the wrong way, but try to understand that I am attempting to stir your souls. I want you to have a vested position. Just keep in mind that our problems are not as simple as some would have you believe.
Ignorant Statement Number One:
“We’ve seen more manufacturing jobs created since I’ve been president than any time since the 1990s. That’s a fact.” – — Barack Obama on Wednesday, June 1st, 2016 in a town hall
Is that a fact? I suppose that really depends on how you want to look at that. If you would like to ignore factual data, then sure. Let’s go with that. I guess that means the economy is great, I guess we can stop looking. However, if factual data is important to you, then you need to understand that Obama actually has presided over a net loss of manufacturing jobs since he has been in office.
I have a lot of numbers that can blow his statement away, but let me just use Politi-Fact’s numbers so no one has to cry about it. From July 1993 through April 1998, the country added 898,000 jobs. Obama’s presidency officially began on January 20, 2009. Between March 2010 and May 2016, there has been an increase of 832,000 manufacturing jobs. That’s a difference to the negative of about 66,000. At the start of 2000, there were a total of 17.28 million employed in manufacturing. Today, that number stands at 12.29 million. We are seeing job losses, not gains.
It’s actually much worse than this. General Motors has recently said it will shut five U.S. auto assembly plants for varying durations in January. They are also set to layoff at least 1300 employees. This is evidently to cut oversupply of sedans which have fallen out of favor among U.S. consumers. For our purposes here, simply take note of falling demand.
It’s easy to pick out the silver lining in something like manufacturing – or any single set of numbers really. Though I believe I have already shown Obama’s statement to be a little more than misleading, let’s take a look at the broader picture for a moment and stop lying to ourselves. The U-3 Unemployment recently dropped to 4.4% (revised from 4.3%) having added a net total of only 178,000 new jobs. I have written about how there are about 318 million people living in the United States and how that math simply doesn’t add up.
Sure, we could talk about how the labor force participation continues to decline (now at 62.7%) and how it’s been bouncing on record lows all year, or we could talk about how Americans that are no longer looking for work are no longer counted as unemployed. We could talk about the differences in unemployment numbers and what they mean, but I think it’s probably more telling to consider what the financial world is looking at.
According to financial research institutions, unemployment for baby boomers is at 16%; unemployment for Gen X is 25% and unemployment for Gen Y is 23%. I’m not a mathematician but that seems slightly higher than the U-3 number provided by the government and media. It’s also a bit higher than the U-6 number. However, it’s not surprisingly right in-line with what John Williams has been saying. This is what the financial world knows about unemployment and what they are sharing among themselves. Averaged out, that’s an unemployment rate of 21.3%. They also showed an average of 13% that were permanent part-time employees and only 46% that have meaningful full-time employment. That’s pretty grim. That means that well under half of the US population has meaningful employment.
Even during the holiday rush, employers added not quite 180,000 jobs since the election; slightly less than what was expected. Along with fewer jobs, wages fell slightly in November as well. So even if you got that part-time holiday job, you’re probably getting less money for it. Add in high-end retail closures and a thriving deep discount market (Dollar General, Dollar Tree, Family Dollar, Burlington, etc.) and you start to get a clearer picture of the reality of our economy. Unfortunately, this is just the beginning.
Time has reported that it has gotten so bad that only two-thirds of workers are confident in their ability to retire. That means a third of what few workers are left, still don’t know what they are going to do about retirement, or if it’s even an option. Furthermore, half of the few workers that are left believe they are building a sufficient retirement fund, according to a report from Transamerica Center for Retirement Studies.
Sounds bad, right? You’re probably not hearing about this in the media. However, it’s really easy to prove to yourself. If the employment issue were really that bad, you would see rising mortgage defaults along with declining home ownership, rising rental demand, credit card defaults and rising household debt in general. And actually, that’s exactly what we are seeing.
We have seen home values increasing over the last four years. The media spins this as a good thing even though young people and Black Americas are less likely to see any of those benefits. In fact, the truth is that home ownership is on the decline across the board. Time reports that ownership among white households has dropped 5%, it has dropped 16% for black households and 18% among households headed by an adult younger than 35. It’s a problem even for the elderly. For those older than 65, the home ownership rate is down 3%.
It makes sense though. If you are not gainfully employed, you’re going to be less likely to afford a home, and since employment is actually sliding, we should expect to see home ownership slide as well. But the truth is that home ownership is the worst it’s been since 1965, and it’s getting worse. The Wall Street Journal just reported that “almost 40% of young Americans were living with their parents, siblings or other relatives in 2015, the largest percentage since 1940.” Interest rate hikes are not going to help anything because payments will be higher across the board, while at the same time, people are going to be dealing with the inflationary mechanisms at the store. This means less money overall.
Mortgage defaults are rising. Mortgageorb reported that the default rate on first mortgages increased to 0.70%, according to the S&P/Experian Consumer Credit Default Indices. The default rate for second mortgages rose to 0.58%. It doesn’t sound like much, but there is more to this story. Rental demand is on the rise for both apartments and rental homes. In fact, Fannie Mae’s Economic & Strategic Research Group says that many single-family homes that would typically be viewed as starter homes for young families are now serving as rental properties. Raddon Financial shows that four out of 10 millennials say they rent because it provides them more flexibility in their lifestyle and 84% of would-be first-time millennial home-buyers say they aren’t able to make a purchase because can’t make a down payment. Consider future job prospects, and I see a problem in the near future. Speaking of apartment demand, chief economist for MPF Research, Greg Willett was quoted as saying, “Strong demand pushed occupancy back to the post-recession peak.”
Credit Card defaults are on the rise and will likely get worse. It’s actually big news. The Wall Street Journal ran a story this month suggesting that “missed payments on credit cards and other consumer loans are likely to rise next year, according to a new report released Wednesday by credit-reporting firm TransUnion”. Credit Card debt is already considered a crisis, and now it’s going to get worse?
Household debt is on the rise as well. In fact, Investopedia recently ran a story headlined as “America’s Rising Household Debt: What’s Behind It?” In that article, they clearly state that “new data from the New York Federal Reserve suggests that after a debt decline, Americans are borrowing money at a rate that approaches pre–Great Recession levels. The result: Household debt is rising and credit cards are a major driver, along with mortgages, student loans and auto loans.”
Maybe this all contradicts what you’ve heard about the economy growing 3.5% in the third quarter, but have you heard about the numerous experts suggesting that number is overstated? Have you heard about our sliding 1.6% GDP projection or how millennials have a debt to asset ratio of 131%? I wish the good news was real, but it’s not. Try to remember it wasn’t just a couple months ago that Minneapolis Federal Reserve President Neel Kashkari told CNBC that the economy wasn’t growing. Has anything really changed?
I personally feel that full year-over-year GDP growth for 2016 will be revised down to somewhere between 1.5% and 1.7%. I also don’t see much of what has happened since the election changing what has already been solidified. It’s going to take a lot of time and effort to change this monster and a president-elect who has yet to enact a single policy doesn’t do it. This movement is false and based on nothing more than “what if”. Factor in a worsening trade deficit and Federal Budget Deficit, and the picture becomes much clearer.
Ignorant Statement Number Two: (or any variation of any the following)
“People need to take responsibility for their debts.” “No sympathy whatsoever for student loan deadbeats.” “It’s pretty simple folks: don’t borrow it if you don’t want to pay it back.” “It’s about personal discipline and responsibility.”
What terribly ignorant things to say. No meaningful employment, rising personal debt, and no prospects for a great job; what is someone supposed to do? We are told by the government, our friends and family, employers and so on, that going back to school is a good idea. However, about 7 in 10 Americans have less than $1000 in savings and more than half have no savings at all. So it doesn’t matter if it’s a university or a trade school, money is more than likely going to have to be borrowed if you need new skills for a chance at potential employment.
Student Loan Hero points out the statistics. Americans owe nearly $1.3 trillion in student loan debt, spread out among about 44 million borrowers. This is getting worse and worse by the day. 39% of Baby Boomers have a Bachelor or Advanced Degree; 48% of Gen Y have Bachelor or Advanced Degree. Now consider that the average Class of 2016 graduate has $37,172 in student loan debt; that’s up six percent from last year. It’s substantially higher for those with advanced degrees. In fact, student loan debt is now greater than credit card debt. Sure, tuition continues to rise and there are a bunch of reasons for that, but that’s not the point. What you need to ask is why would someone take on such debt?
Statistically it’s simple. College graduates as a group did much better during the financial crisis and recession than those with only a high school degree (who suffered double-digit declines in employment). It was simply for the chance at getting or keeping a job. Can you understand that? These folks are hardly dead-beats. Yet we find ourselves in a student loan crisis all the same. Some are so pinched that they are losing their social security benefits over it as well. Clearly there is a problem.
What I want you to understand is that the reality of situation has forced the hand of some who were desperate. I can concede to the idea that there are some who have taken advantage of the situation and decided to get a liberal arts degree that doesn’t do anyone a bit good, but by grouping everyone together, you miss a large portion who were simply trying to do the right thing. Unfortunately, the lies and half-truths from both the government and the media have created a sense of false-hope and damned every borrower into a position of perpetual servitude. Let me explain.
QZ.com – Survey research conducted by economists Lawrence Katz of Harvard University and Alan Krueger at Princeton University shows that from 2005 to 2015, the proportion of Americans workers engaged in what they refer to as “alternative work” jumped from 10.7% to 15.8%. Alternative work is characterized by being temporary or unsteady—such as work as an independent contractor or through a temporary help agency.
“We find that 94% of net job growth in the past decade was in the alternative work category,” said Krueger. “And over 60% was due to the [the rise] of independent contractors, freelancers and contract company workers.” In other words, nearly all of the 10 million jobs created between 2005 and 2015 were not traditional nine-to-five employment.
So basically, they borrowed all that money on a promise, only to find out that a part-time or temporary job that wouldn’t pay enough to pay back the loan was what they would get. Awesome! Do you want to hear something even more messed up? According to Raddon Financial, roughly 52% of millennials feel their student loan debt has prevented- or will prevent them from fulfilling their personal and financial goals — e.g., saving for retirement, investing funds to build personal wealth, purchasing a home, buying a car or even taking a vacation. The last I checked, that is a short list of the American Dream. Speaking of which, understand that Millennials, born in the 1980s, only have a 50% likelihood of earning more money than their parents did. Some probably think “too bad”. Well, understand that the bottom 50% of all workers today average just $25,000 a person, according to the latest data. The problem I am trying to layout here is like a cancer – and it’s getting worse.
I have news for everyone. Higher interest rates along with higher inflation are just going to exacerbate the entire situation. Sure, higher rates might do well for those who already have money or a good job, but for over half of the country (those that are left), it’s going to be devastating.
We are too far down this rabbit hole. You need to see how everything in this article is connected. It’s a cause and effect scenario. This math is simple. You need money to pay your bills. You need a job to make the money. Truck Drivers, factory and warehouse workers, and many other jobs are set to shed thousands upon thousands of positions over the next ten years, making an already dismal unemployment rate even worse. Low skilled and even highly skilled positions are going to be phased out. So what is someone supposed to do? Get a new set of skills, right? How are the people who didn’t see this coming, those who are out of job, those without savings and those not making any real money supposed to accomplish this?
Folks, understand that there are a lot of people who would love to have a great job, pay their bills, have a happy family and spend money on that family in a thriving economy. But as you can clearly see, there is a massive disconnect between what many see on the news and what we see on the streets. The question I have is exactly how is someone supposed to pay on a debt when they can’t get a job to pay for the debt? How are they supposed to pay on a loan when their job doesn’t pay enough, or they lost their job because people refuse to buy American, or they were replaced by a robot and can’t find a new job(s) that will pay them what they need? You want some advice? Grow a heart, because statistically speaking, you’re probably going to be in the same boat in the coming years.
Some would retort with the idea of starting their own business. That’s awesome and perhaps even feasible in some states (if you can get the capital). However, there is phrase thrown around from time to time in entrepreneurial circles; “taxed out of business”. I shouldn’t have to delve into that one considering the last eight years of record taxation while still running a deficit. I’m sorry, but as long as we continue to follow the current economic model (big government, high taxes, high regulation, massive imports, Keynesian economics, etc), this problem is just going to get worse and worse.