Truth Behind So-Called “Recovery” in the U.S. Economy
Last Friday, the U.S. Bureau of Labor Statistics reported that in the month of May, 280,000 jobs were added to the U.S. economy. The unemployment rate was unchanged and stood at 5.5%. (Source: Bureau of Labor Statistics, June 5, 2015.)
If you just look at the current unemployment rate, it’s a massive improvement from the 10% unemployment rate seen in the midst of the Great Recession. But here’s what the job numbers are not telling you:
- The majority of jobs being created in the U.S. economy continue to be in low-wage-paying sectors.
- The labor participation rate (that’s the number of Americans actually working) is the lowest in decades.
- Part-time work is soaring.
- Millions of Americans have stopped looking for work because they believe there’s no full-time work available for them.
- The underemployment rate (that’s the unemployment rate when you add back people who have part-time jobs because they can’t get full-time jobs and people who have given up looking for work) is still extremely high at about 11%. Yes, after seeing our “official” national debt increase by $8.0 trillion since the Credit Crisis of 2008, the underemployment rate (what many economists like me consider to be the true unemployment rate) today is 11%.
But the sad unemployment data doesn’t constitute the only problem with the U.S. economy.
Americans Buying Cars on Credit Like Never Before
U.S. consumer spending data is distorted, too!
In May of this year, car sales in the U.S. reached an annual pace of 18.1 million units—the highest since 2006. (Source: Federal Reserve Bank of St. Louis, last accessed June 8, 2015.)
But when we look closer at the data, we find Americans are increasingly buying cars on credit. In the first quarter of 2011, auto loans amounted to $706 billion. In the first quarter of 2015, they reached $968 billion. (Source; Federal Reserve Bank of New York, last accessed June 8, 2015.)
But it’s not the jump in car loans that is the problem. According to information and market company Experian, average loan terms for new and used vehicles have reached all-time highs of 67 and 62 months respectively—yes, that’s five years, on average, to pay off a car! Almost 30% of all car loans now have terms lasting 73 to 84 months—the highest percentage on record. (Source: Experian, June 1, 2015.)
Greatest Financial Disparity in U.S. History?
The U.S. economy will not see growth until average Joe and Jane American are prospering. Right now, they are working, but they have a low-wage-paying job, income that isn’t going up, and expenses that are increasing; so they become increasingly dependent on debt to make it work.
If we look back at American economic history, all recoveries from “busts” have had the middle class—consumers that make up two-thirds of U.S. gross domestic product (GDP)—behind them. But this time, the situation is very different.
The Federal Reserve’s policies have created a great disparity of income and wealth in this country. Those with assets (the great minority) have recovered and gotten richer since the Credit Crisis of 2008. Those without assets (the great majority) are struggling…and I question their survivability.