Even with all the setbacks from recessions, burst bubbles and vanishing industries, the United States has still pumped out breathtaking riches over the last three and half decades.

The real economy more than doubled in size; the government now uses a substantial share of that bounty to hand over as much as $5 trillion to help working families, older people, disabled and unemployed people pay for a home, visit a doctor and put their children through school.

Yet for half of all Americans, their share of the total economic pie has shrunk significantly, new research has found.

This group ”” the approximately 117 million adults stuck on the lower half of the income ladder ”” “has been completely shut off from economic growth since the 1970s,” the team of economists found.

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The eye-popping improvement in economic fortunes last year raises the question: If incomes are up and poverty is down, why is Donald J. Trump’s message of economic decay resonating so broadly?

The answer is in plain sight. While the economy finally is moving in the right direction, the real incomes of most American households still are smaller than in the late 1990s. And large swaths of the country ”” rural America, industrial centers in the Rust Belt and Appalachia ”” are lagging behind.

“We ain’t feeling too much of all that economic growth that I heard was going on, patting themselves on the back,” said Ralph Kingan, the mayor of Wright, Wyo. “It ain’t out in the West.”

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…63-year-old [Phyllis Swenson of] Fairfax, Virginia, resident is among millions of Americans who haven’t rebounded with the improving U.S. economy. Part-time work at Vienna Presbyterian doesn’t pay all her bills, and almost a year of futile job-hunting has left her desperate.

“Recovery?” she scoffs. “How are we recovering?”

The labor market has staged a strong comeback: Unemployment is 4.7 percent, down from 9.5 percent when the economy started expanding in June 2009. Employers have added an average 150,000 jobs a month this year, though May slowed to just 38,000. The rate at which people quit, a handy measure of job mobility, is trending up.
Yet some Americans still feel a deep sense of betrayal. Their journey back to meaningful work has been brutal — if they even arrived — leaving them with depleted savings, increased debt, homes lost to lenders and for some, long searches that stripped away their most valuable possession: self-esteem. Many who did find jobs now earn less, with fewer benefits.

This has helped fuel Donald Trump’s improbable rise and Bernie Sanders’s strong challenge to Hillary Clinton. Thousands cheer at rallies when the Republican front-runner claims he’ll put people back to work and the Democratic contender rails against income inequality.

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In the United States, nearly one-third of adults, about 76 million people, are either “struggling to get by” or “just getting by,” according to the third annual survey of households by the Federal Reserve Board.

That finding, dismal though it is, represents a mild improvement in general well-being last year, compared with the two years before. The improvement, however, was clearly too little to raise Americans’ spirits: The new survey, which was conducted in late 2015 and released last week, also shows that optimism about the future has tempered.

The Fed policy committee should take the survey to heart when it meets this month to decide whether to raise interest rates. Higher rates are a way to slow an economy that is at risk of overheating ”” a far-fetched proposition when tens of millions of Americans are barely hanging in there.

Read it all from the New York Times.

I know what it is like to have to juggle creditors to make it through a week. I know what it is like to have to swallow my pride and constantly dun people to pay me so that I can pay others. I know what it is like to have liens slapped on me and to have my bank account levied by creditors. I know what it is like to be down to my last $5””literally””while I wait for a paycheck to arrive, and I know what it is like to subsist for days on a diet of eggs. I know what it is like to dread going to the mailbox, because there will always be new bills to pay but seldom a check with which to pay them. I know what it is like to have to tell my daughter that I didn’t know if I would be able to pay for her wedding; it all depended on whether something good happened. And I know what it is like to have to borrow money from my adult daughters because my wife and I ran out of heating oil.

You wouldn’t know any of that to look at me. I like to think I appear reasonably prosperous. Nor would you know it to look at my résumé. I have had a passably good career as a writer””five books, hundreds of articles published, a number of awards and fellowships, and a small (very small) but respectable reputation. You wouldn’t even know it to look at my tax return. I am nowhere near rich, but I have typically made a solid middle- or even, at times, upper-middle-class income, which is about all a writer can expect, even a writer who also teaches and lectures and writes television scripts, as I do. And you certainly wouldn’t know it to talk to me, because the last thing I would ever do””until now””is admit to financial insecurity or, as I think of it, “financial impotence,” because it has many of the characteristics of sexual impotence, not least of which is the desperate need to mask it and pretend everything is going swimmingly. In truth, it may be more embarrassing than sexual impotence. “You are more likely to hear from your buddy that he is on Viagra than that he has credit-card problems,” says Brad Klontz, a financial psychologist who teaches at Creighton University in Omaha, Nebraska, and ministers to individuals with financial issues. “Much more likely.” America is a country, as Donald Trump has reminded us, of winners and losers, alphas and weaklings. To struggle financially is a source of shame, a daily humiliation””even a form of social suicide. Silence is the only protection…

Financial impotence goes by other names: financial fragility, financial insecurity, financial distress. But whatever you call it, the evidence strongly indicates that either a sizable minority or a slim majority of Americans are on thin ice financially. How thin? A 2014 Bankrate survey, echoing the Fed’s data, found that only 38 percent of Americans would cover a $1,000 emergency-room visit or $500 car repair with money they’d saved. Two reports published last year by the Pew Charitable Trusts found, respectively, that 55 percent of households didn’t have enough liquid savings to replace a month’s worth of lost income, and that of the 56 percent of people who said they’d worried about their finances in the previous year, 71 percent were concerned about having enough money to cover everyday expenses.

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[Dolores Westfall]…endures what is for many aging Americans an unforgiving economy. Nearly one-third of U.S. heads of households ages 55 and older have no pension or retirement savings and a median annual income of about $19,000.

A growing proportion of the nation’s elderly are like Westfall: too poor to retire and too young to die.

Many rely on Social Security and minimal pensions, in part because half of all workers have no employer-backed retirement plans. Eight in 10 Americans say they will work well into their 60s or skip retirement entirely.

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What’s striking ”” and crucial for understanding our populist moment ”” is the fact that the leadership cadres of both parties aren’t just unresponsive to this anxiety. They add to it.

The intelligentsia on the left rarely lets a moment pass without reminding us of the demographic eclipse of white middle-class voters. Sometimes, those voters are described as racists, or derided as dull suburbanites who lack the élan of the new urban “creative class.” The message: White middle-class Americans aren’t just irrelevant to America’s future, they’re in the way.

Conservatives are no less harsh. Pundits ominously predict that the “innovators” are about to be overwhelmed by a locust blight of “takers.” The message: If it weren’t for successful people like us, middle-class people like you would be doomed. And if you’re not an entrepreneurial “producer,” you’re in the way.

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I will take comments on this submitted by email only to KSHarmon[at]mindspring[dot]com.

If the Federal Reserve proceeds as expected and raises US interest rates for the first time in almost a decade on Wednesday it will be an affirmation of what Janet Yellen and her fellow policymakers see as the strength of the US recovery.

It will also be at odds with what many in the US’s industrial economy are seeing.

From manufacturing behemoths like Caterpillar and Deere & Co to companies supplying the industrial sector the common theme in recent months has been that, thanks to a strong dollar and a collapse in commodity prices, tough times are back. Some are going so far as to declare the arrival of an industrial recession.

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Private equity and hedge fund firms have bought more than 100,000 troubled mortgages at a discount from banks and federal housing agencies, emerging as aggressive liquidators for the remains of the mortgage crisis that erupted nearly a decade ago.

As the housing market nationwide recovers, this is a dark corner from which banks, stung by hefty penalties for bungling mortgage modifications and foreclosures, have retreated. Federal housing officials, for the most part, have welcomed the new financial players as being more nimble and creative than banks with terms for delinquent borrowers.

But the firms are now drawing fire. Housing advocates and lawyers for borrowers contend that the private equity firms and hedge funds are too quick to push homes into foreclosure and are even less helpful than the banks had been in negotiating loan modifications with borrowers. Federal and state lawmakers are taking up the issue, questioning why federal agencies are selling loans at a discount of as much as 30 percent to such firms.

Read it all from the front page of today’s New York Times.

The danger now is that, just as Greece was once a trailblazer in linking a democratic transition to the European project, so it may become an emblem of a new and dangerous process: the disintegration of the EU. The current crisis could easily lead to the country leaving the euro and eventually the union itself. That would undermine the fundamental EU proposition: that joining the European club is the best guarantee of future prosperity and stability.

Even if an angry and impoverished Greece ultimately remains inside the tent, the link between the EU and prosperity will have been ruptured. For the horrible truth is dawning that it is not just that the EU has failed to deliver on its promises of prosperity and unity. By locking Greece and other EU countries into a failed economic experiment ”” the euro ”” it is now actively destroying wealth, stability and European solidarity.

The dangers of that process are all the more pronounced because Greece is in a highly strategic location. To the south lies the chaos and bloodshed of Libya; to the north lies the instability of the Balkans; to the east, an angry and resurgent Russia.

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In the past, many families like the McDowells, whose household income is almost $100,000 a year, would already be nestled in a starter home, maybe even on the cusp of upgrading to something bigger and more expensive on the profits from their first house.

But even as the market continues to improve ”” sales of existing homes in May increased to their highest pace in six years, the National Association of Realtors reported on Monday, and first-timers make up 32 percent of the buyers ”” it is leaving millions of Americans unwillingly stuck in rental housing.

“It’s more of a new normal,” said Robert J. Shiller, an economics professor at Yale University and a Nobel laureate. “We went through a wrenching experience with the biggest housing bubble and the biggest collapse since 1890. This is an anxious time.”

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The U.S. economy continues to stumble. It’s creating jobs at a goodly clip, but other aspects of growth are less impressive. Business investment has been lackluster. The housing recovery is improving but remains short of where many economists thought it would be. Consumer spending, representing slightly more than two-thirds of total spending, has been soft. The economy has a tentative quality that repeatedly disappoints forecasts of stronger growth.

My main explanation for this ”” as I’ve argued before ”” is the hangover from the 2008-2009 financial crisis and the Great Recession. These events changed economic psychology, precisely because they were unanticipated and horrific. They transcended the experience of most Americans (that is, anyone who hadn’t lived through the Great Depression). Corporate executives and consumers alike became more defensive; they saved and hoarded a bit more. If a novel calamity struck once, it could strike again. They’d better prepare.

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The U.S. economy shrank at an annualized pace of 0.7 percent in the first three months of the year, according to government data released Friday morning, a tumble for a recovering nation that until recently seemed poised for takeoff.

The contraction, the country’s third in the aftermath of the Great Recession, provides a troubling picture of an economy that many figured would get a lift from cheap oil, rapid hiring and growing consumer confidence. Instead, consumers have proved cautious, and oil companies have frozen investment ”” all while a nasty winter caused havoc for transportation and construction and a strong dollar widened the trade deficit.

The numbers released Friday were a revision of earlier figures that had shown GDP growing in the first quarter at 0.2 percent. Markets had since expected the downward revision, in large part because of recent data showing the trade deficit at a 6½-year high.

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The Federal Reserve’s report on the economic well-being of U.S. households is out, and it contains one very interesting finding: A decent share of Americans want to work longer hours even without a raise.

The Fed asked non-self-employed workers whether they’d prefer to work more, less, or the same amount that they now work if their hourly wage was unchanged. The goal of the question was to help gauge the amount of underemployment in the economy, according to the report.

Thirty-six percent of respondents said they’d prefer to work more hours at their current wage. Among those who work part time, the share is even higher at 49 percent. The results might help Fed Chair Janet Yellen and her colleagues connect the dots in a labor market that’s still flashing mixed signals.

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That the Great Recession of 2007-09 made Americans have fewer kids is no surprise, but a new study shows how big the toll was.

Birth rates for U.S. women in their 20s dropped more than 15% between 2007 and 2012, just before and after the recession, the Urban Institute, a nonpartisan policy research group, said in a new analysis of data from the Centers for Disease Control & Prevention released Tuesday.

Among Hispanic 20-somethings, the birth rate dropped 26%. Non-Hispanic blacks? 14%. By contrast, non-Hispanic white 20-somethings saw an 11% decline.

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One thing going on is that the major lifestyle and utility improvements of the past generation”“really cheap access to communication, information, and entertainment”“are overwhelmingly available to pretty much everyone. On the one hand, this means that recent economic growth assessed in terms of individual utility and well-being is much more equal then when assessed in terms of income. On the other hand, it means that access these benefits seems much more like simply the air we breathe then as a marker of class status, or achievement.

Thus a loss of the ability to securely attain enough of economic security to firmly hold the indicators of what past generations saw as middle-class life shows itself as a loss. And those who focus on security rather than on utility do not see these as offset buy the information revolution.

Read it all and please note it is a follow up to this article previously posted.

2) Finances cripple us.

Years ago, it didn’t cost upward of $200,000 for an education. It also didn’t cost $300,000-plus for a home.

The cost of living was very different than what it is now. You’d be naive to believe this stress doesn’t cause strain on marriages today….

3) We’re more connected than ever before, but completely disconnected at the same time.

Let’s face it, the last time you “spoke” to the person you love, you didn’t even hear their voice.

You could be at work, the gym, maybe with the kids at soccer. You may even be in the same room….

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Median per capita income has basically been flat since 2000, adjusted for inflation. The typical American family makes slightly less than a typical family did 15 years ago. And while many goods have become cheaper or better, the price of three of the biggest middle-class expenditures ”“ housing, college and health care ”“ have gone up much faster than the rate of inflation.

Equally important, Mr. Hirschl found a high degree of income volatility among most Americans in the four decades between 1969 and 2011. At some point in their working lives, a full 70 percent earned enough to put them in the top fifth of earners, and as many as 30 percent reached the equivalent of $200,000 in 2009 dollars, or roughly the top 4 percent.

Similarly, nearly 80 percent will at least temporarily plunge into a red zone, where their income drops near or below the poverty line, or they are compelled to gain access to a social safety net program like food stamps or collect unemployment insurance. More than half of Americans ages 25 to 60 will experience at least one year hovering around the poverty line.

Read it all (my emphasis).

Oil-related job cuts may start to slow: Energy firms announced plans to lay off 1,279 workers in March, down from 16,000 in February. But for oil patch states, other questions remain: the health of the service economy surrounding energy firms, the reliability of tax revenues, and so on.

Some of that uncertainty may be trickling through to the broader economy. Some 42% of all IBD/TIPP respondents still say the U.S. is in a recession in April, nearly six years after the economic recovery began.

Yet recent data has been fitful, making it hard to get a clear read on whether the economy is turning down or just taking a beating from temporary factors ”” the oil price plunge, severe winter weather, and the West Coast ports labor slowdown, for example.

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Raghuram Rajan got it started. On Jan. 15, the governor of the Reserve Bank of India jolted traders on Mumbai’s Dalal Street by cutting interest rates. The surprise was the timing of the announcement: Rajan wasn’t supposed to deliver a policy statement for another 19 days.

The weirdness continued that same day””in Switzerland, of all places. For three years, the Swiss National Bank had steadily bought euros on currency markets to keep the country’s franc from surging in value relative to the euro, and thereby choking off growth. Unorthodox, yes; but global financial markets had grown accustomed to the regular renewal of the bank’s stance. Without warning, however, the Swiss cut the franc’s tether. Swiss National Bank chairman Thomas Jordan also set the benchmark Swiss lending rate at negative 0.75%. In theory, a lower rate should put downward pressure on the franc; not enough in this case, as the franc’s value shot up by 18% in the days that followed. Many hedge funds bled red.

And on it went. The Danes cut interest rates four times in the span of a few weeks. As this issue of the magazine neared deadline, China’s central bank cut rates by a quarter of a percentage point and Poland slashed them by a half point. In the first 60 days of 2015, some 20 central banks had executed stimulus measures.

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Rarely have investors lavished so much attention on a single word. After a two-day meeting, the Federal Reserve dropped the word “patient” from its monetary-policy statement. Why the fuss over this single word?

“Patient”, in Fed-speak, indicates that it will hold off increasing interest rates for at least two meetings. Now the word has been ditched, at subsequent meetings (most probably in June) we could see rates move off from rock-bottom for the first time since 2008.

The last rate-tightening cycle began over a decade ago. The Fed feels comfortable, it seems, with raising interest rates now that unemployment has moved towards 5.5%. The latest forecasts from the Fed show that it expects the economy to expand by 2.3%-2.7%, a slight fall from the projections in December but still one of the strongest in the OECD, a club of mostly rich countries.

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The best three-month stretch of hiring since 1997 has positioned the U.S. labor market to start delivering stronger wage growth for a wider swath of Americans after more than five years of sluggish recovery from a deep recession.

The economy created more than a million jobs over the past three months, with a steady gain of 257,000 in January and sizable upward revisions to prior months’ figures, the Labor Department said Friday. The hiring spree prompted many previously sidelined American workers to begin the job search, causing the unemployment rate to tick up a tenth of a percentage point to 5.7%.

“The economy seems to be moving full steam ahead,” said Sung Won Sohn, an economist at California State University Channel Islands. Following years of lackluster growth, “I think it’s the beginning of a healthy recovery.”

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As 2015 begins, the global economy remains weak. The United States may be seeing signs of a strengthening recovery, but the eurozone risks following Japan into recession, and emerging markets worry that their export-led growth strategies have left them vulnerable to stagnation abroad. With few signs that this year will bring any improvement, policymakers would be wise to understand the factors underlying the global economy’s anemic performance ”“ and the implications of continued feebleness.

In the words of Christine Lagarde, the International Monetary Fund’s managing director, we are experiencing the “new mediocre.” The implication is that growth is unacceptably low relative to potential and that more can be done to lift it, especially given that some major economies are flirting with deflation.

Conventional policy advice urges innovative monetary interventions bearing an ever expanding array of acronyms, even as governments are admonished to spend on “obvious” needs such as infrastructure. The need for structural reforms is acknowledged, but they are typically deemed painful, and possibly growth-reducing in the short run. So the focus remains on monetary and fiscal stimulus ”“ and as much of it as possible, given the deadening effects of debt overhang.

And yet, the efficacy of such policy advice remains to be seen.

Read it all.

The economic recovery is real, and even though it’s not spectacular, it’s getting there.

The good news is that the economy grew at a 5 percent annual pace in the third quarter this year, revised up from the 3.9 percent that the Commerce Department had previously estimated. It’s the best quarterly growth since 2003, and, on the heels of the 4.6 percent growth in the second quarter, it’s also the best six months the economy has had in that long. The even better news, though, is that this growth, unlike every other uptick the past few years, looks sustainable.

This isn’t a blip. It’s a boom.

Well, at least by the sad standards of this slow and steady recovery. The truth is that for all the hype and headlines about every little head fake, the economy has just been chugging along at the same 2 percent pace the past few years.

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The U.S. economy is on track for its strongest year of job creation since 1999, as employers last month ramped up hiring and wage growth posted a small””but potentially significant””pickup.

Nonfarm payrolls rose a seasonally adjusted 321,000 in November, the strongest month of hiring since January 2012, the Labor Department said Friday. Hiring was broad across industries, led by gains in the professional and business-services sector.

“The economy may not yet be a big mean jobs machine but it is just about there,” Joel Naroff, president and chief economist at Naroff Economic Advisors Inc., said in a note to clients.

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The bills arrive as regularly as a heartbeat at the Vories’s cozy bi-level brick house just across the Ohio River from Cincinnati. It’s the paychecks that are irregular.

These days, Alex Vories, 37, is delivering pizzas for LaRosa’s, though he has to use his parents’ car since he wrecked his own 1997 Nissan van on a rainy day last month. In the spring and autumn, he had managed to snag several weeks of seasonal work with the Internal Revenue Service, sorting tax returns for $14 an hour. But otherwise the family had to make do with the $350 a week his wife, Erica, brought home from her job as a mail clerk for the I.R.S.

“We just kind of wing it every month,” said Mr. Vories, whose unemployment benefits ran out at the end of 2013, 10 months after he lost his job answering phones at Fidelity Investments. Ever since, the family’s income has bounced up and down from one week to the next, like the basketball he and his two sons play with in their driveway, next to the Kentucky Wildcats pennant planted in their front yard.

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These debt statistics come from Debt.org:

“More than 160 million Americans have credit cards.””The average credit card holder has at least three cards.””On average, each household with a credit card carries more than $15,000 in credit card debt.”

Not only do we have large amounts of credit card debt, we also have student loans, mortgages, cars, and medical debts. Our debt is growing faster than our income, and many middle class workers have trouble staying afloat. Money-Zine evaluated debt growth and income growth over the past few decades and found that “back in 1980, the consumer credit per person was $1,540, which was 7.3% of the average household income of $21,100. In 2013, consumer debt was $9,800 per person, which was 13.4% of the average household income of $72,600. This means debt increased 70% faster than income from 1980 through 2013.”

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“Bankruptcy? Repossession? Charge-offs? Buy the car YOU deserve,” says the banner at the top of the Washington Auto Credit website. A stock photo of a woman with a beaming smile is overlaid with the promise of “100% guaranteed credit approval”.

On Wall Street they are smiling too, salivating over the prospect of borrowers taking Washington Auto Credit up on its enticing offer of auto financing. Every car loan advanced to a high-risk, subprime borrower can be bundled into bonds that are then sold on to yield-hungry investors.

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Federal Reserve policy makers are missing a key element as they assess the health of the labor market: data that includes whether those who are employed are overqualified for their job or would like to work more hours.

As a result, the “significant underutilization of labor resources” that Fed officials highlighted last month as they renewed a pledge to keep interest rates low for a “considerable period” is probably even more severe than currently estimated. And the information gap means policy makers may have more difficulty gauging the right moment to raise rates off zero.

“We have more slack than the official statistics suggest,” said Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York. “Because it’s difficult to measure underutilization, there’s still a lot of uncertainty as to how much slack remains, which means there’s uncertainty as to the appropriate stance of monetary policy.”

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American banks are loading up on U.S. government debt, a sign they remain cautious on the economy even with the jobless rate at a six-year low and corporations at their healthiest in a generation.

Commercial lenders increased their holdings of Treasuries (BUSY) and debt from federal agencies in September by $54 billion to an unprecedented $1.99 trillion, data from the Federal Reserve show. Banks have now been net buyers for 12 straight months.

Read it all.