For 90% Of Americans: There Has Been No Recovery

Street Talk Live ^ | 09/11/2014 | Lance Roberts

[SeekAndFind]

Every three years the Federal Reserve releases a survey of consumer finances that is a stockpile of data on everything from household net worth to incomes. The 2013 survey confirms statements I have made previously regarding the Fed's monetary interventions leaving the majority of Americans behind:

"While the ongoing interventions by the Federal Reserve have certainly boosted asset prices higher, the only real accomplishment has been a widening of the wealth gap between the top 10% of individuals that have dollars invested in the financial markets and everyone else. What monetary interventions have failed to accomplish is an increase in production to foster higher levels of economic activity.

With the average American still living well beyond their means, the reality is that economic growth will remain mired at lower levels as savings continue to be diverted from productive investment into debt service.  The issue, of course, is not just a central theme to the U.S. but to the global economy as well.  After five years of excessive monetary interventions, global debt levels have yet to be resolved."

The full report can be found here. I have selected a few of the more important charts for the purpose of this post.

While the mainstream media continues to tout that the economy is on the mend, real (inflation-adjusted) median net worth suggests that this is not the case overall.

However, when broken down into age groups, the story becomes a bit more interesting.

While many economists have tried to explain that the plunging labor force participation rate (LFPR) was a function of "baby boomers" entering into retirement. This is hardly the case when considering that the net worth of individuals 65-74 fallen since 2007.  It is even a more dire story for individuals approaching retirement (55-64) that have seen their net worth plunge by almost 50% during the same time frame.

The "economic recovery" story is also extremely fragmented when looking at median incomes. According to the Fed survey, median household before-tax incomes have fallen from near $52,000 annually to roughly $47,000 currently. 

Again, the story deepens when viewed by age groups.

Interestingly, the ONLY age-group where incomes have improved is for those between the ages of 65-74.  Again, this suggests that the plunge in the LFPR is not a function of "retirement" as individuals are working well into their retirement years, not because of a desire to work, but due to necessity.

Another mainstream media theme has been that the surging stock market, driven by the Federal Reserve's monetary interventions, has provided a boost to the overall economy. However, as I have suggested previously, given that the bulk of the population either does not, or only marginally, participates in the financial markets, the "boost" has remained concentrated in the upper 10%. The Federal Reserve study breaks the data down in several ways, but the story remains the same.

The median value of financial assets for families has fallen sharply since the turn of the century.

Except for those in the top 10 percent of the population.

 

While the Federal Reserve hoped that inflating asset prices would boost consumer confidence, consumption and economic growth, the problem is that with falling incomes and rising costs of living, the ability to save and invest eluded the majority of families. (Note: I am only showing "pooled" investment funds since that is what is most commonly held.)

Again, the benefit of the Federal Reserve's interventions was clearly concentrated in the top 10%.

When looking at the financial landscape of families, the future does not look bright. The percentage of families with retirement accounts has fallen since 2007, despite surging asset prices.  Again, this is a function of the disparity between incomes and the cost of living.

 

But once again, for the top 10% the last five years has been a windfall. However, it is interesting to note that values dropped in 2013 despite the surge in asset prices. The 80th percentile performed better.

 

Lastly, as I discussed recently in relation to the Bureau Of Labor Statistics adjustments to the employment report, there is little evidence to support the "birth/death" model. Since 2009, the "birth/death" adjustment has added 3.5 million jobs to the employment roll. The assumption is that each month individuals are either starting or closing a business that is not reflected in the more normalized employment data. The problem, however, is that the number of families that owned equity has plummeted during that same period.

Well, except for those in the top 10%.

The wealth gap is clearly evident across all data points. However, it has been the very policies of the current administration that has fostered that wealth divide more than anything else. While the ongoing interventions by the Federal Reserve propelled asset prices higher and fueled the demand for risks, the majority of American families were left behind.

The data clearly explains why many Americans, as shown in a recent WSJ poll, believe that the economy is headed in the wrong direction.

While the financial media incessantly drones on about the rise of the stock market, what is missed is that after two devastating bear markets many families no longer have the capacity to participate (particularly after following Wall Street advice).

Furthermore, the structural transformation that has occurred in recent years has likely permanately changed the financial underpinnings of the economy as a whole. This would suggest that the current state of slow economic growth is likely to be with us for far longer than most anticipate. It also puts into question just how much room the Fed has to extract its monetary support before the cracks in the economic foundation begin to widen.

[cloudmountain]

We are the wealthiest, best off country on the planet, in the human history of the planet and still we whine that "it's just not enough."
It will never be enough. Spoiled.

[FreeAtlanta]

Basically, Obama’s and Democrat’s policies have robbed from the poor and given to the rich.

[Opinionated Blowhard]

The sad part is that the answer for a lot of people is more government spending and subsidies to help the unemployed or under-employed rather than creating jobs and giving people an opportunity to work. Its the Welfare State death spiral that results in great nations dying.

[conservatism_IS_compassion]

We are the wealthiest, best off country on the planet, in the human history of the planet and still we whine that "it's just not enough." It will never be enough. Spoiled.

With 1850 medicine, I’d be long dead. Many of us would be.

Oh beautiful for patriot dream

That sees beyond the years

Thine alabaster cities gleam

Undimmed by human tears

Read more: Lea Michele - America The Beautiful Lyrics | MetroLyrics

That would imply, among other things, the end of death. We still have a ways to go . . .

[Sir Napsalot]

To me, the percentage of families with business equity chart tells the most interesting story:

A lot less business/business owners currently, yet people still need to do their ‘daily business’, so it is totally unsurprising that top 10% made such huge gain.

But current business owners, even the top 10% (most of them are still ‘small business’), operate in slim margin, some of them may even be on the tittering edge. Only Big Business with gubmint cronies profit in current environment.

[kabar]

We are the wealthiest, best off country on the planet, in the human history of the planet and still we whine that "it's just not enough." It will never be enough. Spoiled.

We are living way beyond our means. In order to do that we have borrowed money from future generations. We have a $17 trillion national debt that increases every year and we have over $100 trillion in unfunded liabilities for the entitlement programs. We are not the best off country on the planet. We are just sacrificing the future so we can enjoy the present.

[wrench]

“We are the wealthiest, best off country on the planet, in the human history of the planet and still we whine that “it’s just not enough.”
It will never be enough. Spoiled.”

That sounds just like something Obama would say.

Maybe if we are more like Zimbabwe or Liberia we could really hold our heads high. /s

Some of us were always taught to strive to be the best, and never apologize for success.

[kabar]

The only jobs government creates is more government jobs.

[ozarkgirl]

We are the wealthiest, best off country on the planet, in the human history of the planet and still we whine that "it's just not enough." It will never be enough. Spoiled.

That's true, just by virtue of being born in the US we are in the top 10% income bracket in the world.

But our standard of living is going down.

[Mr. Jeeves]

But current business owners, even the top 10% (most of them are still ‘small business’), operate in slim margin, some of them may even be on the tittering edge.

And if we do manage to eke out a small profit, government is right there to, um, take it...because we didn't build that and don't need it.

Running a small business profitably has become very difficult since 2008. The caste of 60's radicals that started taking over government during the Clinton years is largely to blame, of course, but even the non-radicals are strongly focused on the interests (and political donations) of the top 1% of corporations.

[a fool in paradise]

Obama's policies of importing tech labor (and smuggling completed tech work via the internet without paying import duty on millions of dollars in work) certainly have robbed from my field and given to the rich billionaires who repeatedly lie to Congress that there just isn't enough local talent (to do the work for $14 an hour).

And now he plans to sneak a bit more tech labor into his "immigration" executive order.

[KeyLargo]

Survey: Only 9% of Chicago firms plan to expand hiring in next 6 months

http://www.chicagotribune.com/business/breaking/chi-chicago-hiring-20140911-story.html

[SeekAndFind]

RE: Survey: Only 9% of Chicago firms plan to expand hiring in next 6 months

Well, it’s better than zero. /s

[Sam Gamgee]

I still don’t believe we are in a recovery, period, for anyone but the politicians and rent seeking Wall Street firms that have the ear of the same politicians.

[cloudmountain]

We are living way beyond our means. In order to do that we have borrowed money from future generations. We have a $17 trillion national debt that increases every year and we have over $100 trillion in unfunded liabilities for the entitlement programs. We are not the best off country on the planet. We are just sacrificing the future so we can enjoy the present.

Yes, we ARE living beyond our means but SO IS MOST OF THE FIRST WORLD.

I've been to Europe umpteen times and THEY are incurring debt even more. Eastern Europe is stifling their middle class with taxes. I have NOT been to Albania because I didn't/don't want to go.

The Germans, for example, are trying to "save" parts of Africa and DW always adds the price tag for Deutschland. The Scandinavians pay 65%, MINIMUM, of their salaries for taxes. I have an OLD friend who lives in Sundbyberg, Sweden, and she is a doctor and THAT is her tax rate.

The Brits are supporting Jamaica and everywhere they were colonists, which includes MUCH of the planet. They WAIL about their taxes all the time.

Italy's PROVERBIAL governmental corruption.
MAYBE Japan is better off. MAYBE.

So WHO is better off than we are? Any country in Asia, besides Japan? Any country in Africa, south of our border? Australia and Canada ALSO pay HUGE income taxes and moan about their tax rates as well.
So who is better off? I'll give ya the Japanese, though if you spoke to the middle class folks there, I BET you would also get an earful.

[cloudmountain]

Yes, we ARE living beyond our means but SO IS MOST OF THE FIRST WORLD.

I've been to Europe umpteen times and THEY are incurring debt even more. Eastern Europe is stifling their middle class with taxes. I have NOT been to Albania because I didn't/don't want to go.

The Germans, for example, are trying to "save" parts of Africa and DW always adds the price tag for Deutschland. The Scandinavians pay 65%, MINIMUM, of their salaries for taxes. I have an OLD friend who lives in Sundbyberg, Sweden, and she is a doctor and THAT is her tax rate. Italy's PROVERBIAL governmental corruption. MAYBE Japan is better off. MAYBE.

So WHO is better off than we are? Any country in Asia, besides Japan? Any country in Africa, south of our border? Australia and Canada ALSO pay HUGE income taxes and moan about their tax rates as well.

So who is better off? I'll give ya the Japanese, though if you spoke to the middle class folks there, I BET you would also get an earful.

[cloudmountain]

That's true, just by virtue of being born in the US we are in the top 10% income bracket in the world.

TRUE ENOUGH.

=====================================================

But our standard of living is going down.

Also true.
Mine isn't but my husband, bless his heart, saw the writing on the wall EONS ago. SO, he got a job in the middle east that paid MUCH MORE than his regular USA mechanical engineering job. He made $800.00/month in 1980 and his FIRST paycheck from the middle east company was $5000.00/month. [!!!] His salary increased over the five years of course.

The REAL INCENTIVE was that, as employees with this company, we paid NO federal income taxes on those earnings because the company had a $$DEAL$$ with the IRS. INCENTIVE.
AND, since we were out of our state for 1+ year we were no longer state residences and therefore paid NO state income tax. PURE GRAVY, ALL OF IT.

After TWO years there we bought a house in San Francisco. We were in the middle east five l-o-n-g years. We had our house paid off in NINE years...instead of 30-40 YEARS.

I THINK, and I might be wrong, that some of our lowered standard of living is due to the maggot fool Democrat in our White House. His political party is equally to blame.
The Democrats always believed that money grew on the Taxpayer Tree.

[kabar]

Yes, we ARE living beyond our means but SO IS MOST OF THE FIRST WORLD.

So how does that help us?

I've been to Europe umpteen times and THEY are incurring debt even more. Eastern Europe is stifling their middle class with taxes. I have NOT been to Albania because I didn't/don't want to go.

I have lived in five different countries in Europe for a total of 13 years. Germany is in better fiscal shape than the US. They reduced their welfare state. So did Sweden, but it looks like that might be changing in the upcoming election. When you look at national debt as a percentage of GDP, there are plenty of countries in Europe that are doing better than we are.

The Germans, for example, are trying to "save" parts of Africa and DW always adds the price tag for Deutschland. The Scandinavians pay 65%, MINIMUM, of their salaries for taxes. I have an OLD friend who lives in Sundbyberg, Sweden, and she is a doctor and THAT is her tax rate.

To paraphrase Mark Steyn, the Americans want all the benefits the European welfare state has to offer, they just don't want to pay European taxes. One reason we have such debt is that we are not paying enough taxes to support our welfare state. We either have to cut benefits or raise taxes. There appears to be no political will to do either.

So WHO is better off than we are? Any country in Asia, besides Japan? Any country in Africa, south of our border? Australia and Canada ALSO pay HUGE income taxes and moan about their tax rates as well. So who is better off? I'll give ya the Japanese, though if you spoke to the middle class folks there, I BET you would also get an earful.

I don't know how you define better off, but the quality of life is better in many other countries compared to the US. I have lived in 11 countries and traveled to more than 70 others. We are becoming less free in terms of personal liberties and government controls over 40% of our economy reaching European socialist levels.

109,631,000 Americans lived in households that received benefits from one or more federally funded "means-tested programs" — also known as welfare — as of the fourth quarter of 2012, according to data released Tuesday by the Census Bureau.

When those receiving benefits from non-means-tested federal programs — such as Social Security, Medicare, unemployment and veterans benefits — were added to those taking welfare benefits, it turned out that 153,323,000 people were getting federal benefits of some type at the end of 2012.

The 153,323,000 total benefit-takers at the end of 2012, said the Census Bureau, equaled 49.5 percent of the population. The 150,026,000 taking benefits other than veterans' benefits equaled about 48.5 percent of the population.