This Is About As Good As Things Are Going To Get For The Middle Class – And It’s Not That Good

Depressed - Public DomainThe U.S. economy has had six full years to bounce back since the financial collapse of 2008, and it simply has not happened.  Median household income has declined substantially since then, total household wealth for middle class families is way down, the percentage of the population that is employed is still about where it was at the end of the last recession, and the number of Americans that are dependent on the government has absolutely exploded.  Even those that claim that the economy is “recovering” admit that we are not even close to where we used to be economically.  Many hope that someday we will eventually get back to that level, but the truth is that this is about as good as things are ever going to get for the middle class.  And we should enjoy this period of relative stability while we still can, because when the next great financial crisis strikes things are going to fall apart very rapidly.

The U.S. Census Bureau has just released some brand new numbers, and they are quite sobering.  For example, after accounting for inflation median household income in the United States has declined a total of 8 percent from where it was back in 2007.

That means that middle class families have significantly less purchasing power than they did just prior to the last major financial crisis.

And one research firm is projecting that it is going to take until 2019 for median household income to return to the level that we witnessed in 2007…

For everybody wondering why the economic recovery feels like a recession, here’s the answer: We’re still at least five years away from regaining everything lost during the 2007-2009 downturn.

Forecasting firm IHS Global Insight predicts that real median household income — perhaps the best proxy for middle-class living standards — won’t reach the prior peak from 2007 until 2019. Since the numbers are adjusted for inflation, that means the typical family will wait 12 years until their purchasing power is as strong as it was before the recession. That would be the longest period of stagnation, by far, since the Great Depression of the 1930s.

Of course that projection assumes that the economy will continue to “recover”, which is a very questionable assumption at best.

Meanwhile, total household wealth has been declining for middle class families as well.

According to the New York Times, the “typical American household” is now worth 36 percent less than it was worth a decade ago.

That is a pretty substantial drop.  But you never hear our politicians (especially the Democrats) bring up numbers like that because they want us to feel good about things.

So why is all of this happening?

The biggest reason why the middle class is struggling so much is the lack of good jobs.

As the chart posted below demonstrates, the percentage of the working age population that is actually employed is still way, way below where it was prior to the last recession…

Employment Population Ratio

The “employment recovery” (the tiny little bump at the end of the chart) has been so miniscule that it is hardly even worth mentioning.

At the moment, we still have 1.4 million fewer full-time jobs than we did in 2008 even though more than 100,000 people are added to the U.S. population each month.

And a lot of the workers that have lost jobs since the start of the last recession have never been able to find a new one.

According to a brand new survey conducted by Rutgers University, more than 20 percent of all workers that have been laid off in the past five years still have not found a new job.

Meanwhile, the control freak bureaucrats that run this country continue to kill off small businesses.

In recent years we have seen large numbers of small businesses fail, and at this point the rate of small business ownership in the United States is at an all-time low.

As a result of everything that you have just read, the middle class is shrinking and dependence on the government is soaring.

Today, there are 49 million Americans that are dealing with food insecurity, and Americans received more than 2 trillion dollars in benefits from the federal government last year alone.

For many more statistics just like this, please see my previous article entitled “30 stats to show to anyone that does not believe the middle class is being destroyed“.

Without a doubt, things are not that good for the middle class in America these days.

Unfortunately, the next great wave of financial trouble is rapidly approaching, and once it strikes things are going to get substantially worse for the middle class.

Yes, the stock market set record high after record high this summer.  But what we have observed is classic bubble behavior.  So many of the exact same patterns that occurred just prior to previous stock market crashes are happening once again.

And it is interesting to note that September 22nd has marked important market peaks at various times throughout history…

For traders, September 22 is one of those days with a notorious history. UBS’s Art Cashin notes that September 22 marked various market highs in 1873, 1929, 1980, and even as recent as 2008.

Could the coming months be the beginning of the next major stock market decline?

Small-cap stocks are already starting to show signs of real weakness.  In fact, the Russell 2000 just hit a “death cross” for the first time in more than 2 years

The Russell 2000 has been diverging from the broader market over the last several weeks, and now technicians point out it has flashed a bearish signal. For the first time in more than two years, the small-cap index has hit a so-called death cross.

A death cross occurs when a nearer-term 50-day moving average falls below a longer-term, 200-day moving average. Technicians argue that a death cross can be a bearish sign.

None of us knows what the market is going to do tomorrow, but a lot of the “smart money” is getting out of the market right now while the getting is good.

So where is the “smart money” putting their assets?

In a previous article, I discussed how sales of gold bars to wealthy clients is way up so far this year.

And CNBC has just reported that the ultra-wealthy “are holding mountains of cash” right now…

Billionaires are holding mountains of cash, offering the latest sign that the ultra-wealthy are nervous about putting more money into today’s markets.

According to the new Billionaire Census from Wealth-X and UBS, the world’s billionaires are holding an average of $600 million in cash each—greater than the gross domestic product of Dominica.

Why are they doing this?

Are they concerned about the potential of a market crash?

And if we do see another market crash like we witnessed back in 2008, what is that going to mean for the rest of us?

2008 certainly did not destroy our economy.

But it did cause an immense amount of damage that we have never recovered from.

Now the next wave is approaching, and most people don’t even see it coming.

If The Economy Is Recovering, Why Is The Labor Force Participation Rate At A 36 Year Low?

Unemployment - Public DomainShould we be concerned that the percentage of Americans that are either working or looking for work is the lowest that it has been in 36 years?  In August, an all-time record high 92,269,000 Americans 16 years of age and older did not “participate in the labor force”.  And when you throw in the people that are considered to be “in the labor force” but are not currently employed, that pushes the total of working age Americans that do not have jobs to well over 100 million.  Yes, it may be hard to believe, but there are more than 100 million working age Americans that are not employed right now.  Needless to say, this is not a sign of a healthy economy, and it is a huge reason why dependence on the government has soared to absolutely unprecedented levels.  When people can’t take care of themselves, they need someone else to take care of them.  If the percentage of people in the labor force continues to decline like it has been, what is that going to mean for the future of our society?

The chart below shows the changes in the civilian labor force participation rate since 1980.  As you can see, the rate steadily rose between 1980 and 2000, but since then it has generally been declining.  In particular, this decline has greatly accelerated since the beginning of the last recession…

Labor Force Participation Rate

We have never seen an extended precipitous decline of this nature before.  But instead of admitting that we have a very serious problem on our hands, many mainstream economists are dismissing this decline as “structural in nature”.  For example, check out the following excerpt from a recent Reuters article

A paper published on Thursday by the Brookings Institution, a Washington-based think tank, suggested the decline was primarily due to an aging population and other structural factors, and concluded the labor force would continue to shrink.

But there is a major flaw in this analysis.  It turns out that older Americans are the only group for which employment numbers have actually been going up.  I really like how Zero Hedge made this point the other day…

Well that’s very odd, because it was only two months ago that the Census wrote the following [5]: “Many older workers managed to stay employed during the recession; in fact, the population in age groups 65 and over were the only ones not to see a decline in the employment share from 2005 to 2010 (Figure 3-25)… Remaining employed and delaying retirement was one way of lessening the impact of the stock market decline and subsequent loss in retirement savings.”

Figure 3-25
Yes, Baby Boomers are hitting retirement age.

But that does not explain why the labor force participation rate numbers for younger groups have been going down.

Each month, the U.S. economy has to add somewhere between 100,000 and 150,000 jobs just to keep up with population growth.  Since job creation has been tepid at best in recent years, the only way that the government has been able to get the official unemployment rate to steadily “go down” has been to remove millions upon millions of Americans from the labor force.

According to the official government numbers, since 2007 768,000 jobs have been added to the economy, but a whopping 13 million Americans have been added to the numbers of those “not in the labor force”.

As a result, the official unemployment rate has magically been “declining”.

But the truth is that our employment crisis has not been solved at all.

And it isn’t just the number of jobs that we need to be concerned about.  We are also dealing with a multi-year decline in the quality of our jobs.  In fact, the Wall Street Journal just reported that 34 percent of all U.S. workers are “freelancers” now…

More evidence that this isn’t your parents’ labor market: Roughly one in three U.S. workers is now a freelancer.

Fifty-three million Americans, or 34% of the nation’s workforce, qualify as freelancers, according to a new report from the Freelancers Union, a nonprofit organization, and Elance-oDesk Inc., a company that provides platforms for freelancers to find work. These individuals include independent contractors, temps, and moonlighters, among others.

In other words, about a third of all workers in the country are “temps” at this point.

I don’t know about you, but to me that is an extremely alarming statistic.

If the economy really was recovering, this would not be happening.

And as millions upon millions of Americans are being forced out of the official labor force, an increasing number of people are turning to the underground economy.

For example, in some of our major cities we are witnessing a rise in the number of street vendors.  The following is an excerpt from a recent Los Angeles Times article entitled “More Angelenos are becoming street vendors amid weak economy“…

Sitting at her street vending booth with products arrayed neatly on a sequined purple tablecloth, Jackie Lloyd reflects nostalgically on the days when she had a steady salary and regular hours.

That was four years ago, before the 39-year-old was laid off from her job as an elementary school cafeteria worker and mounting bills forced her to venture into self-employment.

Now the Pico-Union resident hops from location to location, selling body oils, shea butter, soap and incense. She moves when nearby businesses complain or she feels unsafe.

Some days, her sales bring in $150. Others, they don’t break $20.

In order to have a strong middle class, we need middle class jobs.

If our labor force participation rate continues to fall and the quality of our jobs continues to decline, the middle class will continue to shrink.  For much more on this, please see my previous article entitled “30 stats to show to anyone that does not believe the middle class is being destroyed“.

But our authorities never seem to want to admit what our real problems are.

Instead, they love to come up with alternative theories for our economic struggles.

One of the latest theories being put forward by the Federal Reserve is that the economy is not moving along like it should because ordinary Americans are “hoarding money”

One of the great mysteries of the post-financial crisis world is why the U.S. has lacked inflation despite all the money being pumped into the economy.

The St. Louis Federal Reserve thinks it has the answer: A paper the central bank branch published this week blames the low level of money movement in large part on consumers and their “willingness to hoard money.”

This seems completely absurd to me.

From what I can see, most families are just doing their best to survive from month to month these days.

I certainly don’t see a lot of people “hoarding money”.

What about you?

What do you think?

Please feel free to share your thoughts by posting a comment below…

Do NOT follow this link or you will be banned from the site!