September 22, 2015
Prime-Age Job Market Still Weak
The job market appears in fine form. August’s unemployment rate, at 5.1 percent, is now at half of its Great Recession levels.
But while the media latch on to the unemployment rate in the federal government’s monthly jobs reports, economists like Gary Burtless of the Brookings Institution are interested in a different number that’s also part of the monthly update: labor force participation among people in their prime working years, ages 25 through 54.
They are the heart of the labor market, and the trend in their participation rate paints a bleaker picture of the job market, Burtless noted in a recent report. In August, the rate was just 80.7 percent – and still below the 83 percent level prior to the 2008-2009 recession.
Labor force participation is the percentage of Americans working or looking for work. It’s critical to how the job market’s faring, because when it declines it means that even people in their prime working years are giving up on finding a job, indicating underlying weakness in the job market.
On a brighter note, the percentage of prime-age workers who have jobs is rising, though this also remains below pre-recession levels.
Burtless concludes, “The labor market is healing, but the sustained drop in participation is an indicator that the job market is still some way from robust good health.”Learn More
September 10, 2015
Home Buying Not Tied to Student Debt
A popular assertion these days is that young adults paying off student loans can’t afford to buy a house. This might be the financial equivalent of Chicken Little.
Contrary to concerns that the sky is falling – or, rather, the first-time homebuyer market is falling due to student debt – a new study finds very little evidence to support this view.
The researchers tracked the home-buying behavior of more than 5,000 college-going young adults for a full decade through the National Longitudinal Survey of Youth. They confined the analysis to people who attended college – graduates and non-graduates alike – in contrast to previous research that compared the behavior of all young adults and found that borrowing got in the way of homeownership.
The new study actually found they were slightly more likely than non-borrowers to purchase a house. But this could be due to the fact that the borrowers tended to be the type of people who persist and complete their degrees, attend more expensive schools, and possess other socioeconomic advantages. This comparison of borrowers and non-borrowers still didn’t settle the question of whether the probability of owning a home actually decreases as the level of student debt rises.
When the researchers further narrowed the analysis only to individuals who held student loans, they found no relationship between the amount of money borrowed and the probability of homeownership. “If you have $30,000 in debt you’re no less likely to buy a home than if you have $3,000 in debt,” said one of researchers, Jason Houle, an assistant professor of sociology at Dartmouth College.
The findings, Houle said, “cast doubt on this idea that student loan debt is dragging down the housing market.” …Learn More
August 20, 2015
Paying Extra on College Debt Has Wallop
One-third of 18-24 year olds in a new Allstate poll said the best use of their extra funds is getting their college or other debts off their backs. For those considering making larger payments, a loan amortization table demonstrates the impact.
Paying down debt is just another form of saving, and larger loan payments significantly shorten the time it takes to pay it off, while reducing the total interest paid. Start with the $5,000 loan example already loaded into a Bankrate.com student loan amortization calculator:
- Paying $96.66 per month on a $5,000 student loan with 6 percent interest eliminates it in five years. An extra $50 every month – a couple of nights out – knocks two years off the payment time. This can be seen by entering $50 in the top box under the “Extra payments” heading in the calculator and clicking “Show/Calculate Amortization Table.” …
August 18, 2015
The Future of Retirement Is Now
Gray, small, and distinctly female.
This is what the director of MIT’s AgeLab, Joseph Coughlin, sees when he peers into the future of retirement.
“The context and definition of retirement is changing,” Coughlin said earlier this month at the Retirement Research Consortium meeting, where nearly two dozen researchers also presented their Consortium-funded work on a range of retirement topics. Their research summaries can be found at this link to the Center for Retirement Research, which supports this blog and is a consortium member.
Coughlin spooled out a list of stunning facts to impress on his audience the dramatic impact of rising longevity and graying populations in the developed world, and he urged them to think in fresh ways about retirement. In Japan, for example, adult diapers are outselling baby diapers. China already faces a looming worker shortage, and Germany’s population is in sharp decline. In 2047, there will be more Americans over age 60 than children under 15.
“The country will have the demographics of Florida,” Coughlin said. …Learn More
August 13, 2015
Retirement: a Priority for Millennials?
Saving for retirement is more crucial for Millennials than for any prior generation. Data are emerging that reveal how they’re doing.
Vanguard’s 2014 data from its large 401(k) client base shows that 67 percent of young adults between 25 and 34 who are covered by an employer plan are saving – this is well above a decade ago.
A survey recently by the Transamerica Center for Retirement Studies found evidence that this generation makes retirement a priority: a majority of working adults in their 20s and early 30s – now the largest single demographic group in the U.S. labor force – view retirement benefits as “a major factor in their decision on whether to accept a future job offer.”
This indicates that Millennials are getting the message, said Catherine Collinson, president of the Transamerica Center for Retirement Studies.
The growth of automatic enrollment in 401(k) plans “has helped pull young people and non-participants into the plans,” Collinson said, “but I also believe it’s also due to heightened levels of awareness.” …Learn More
July 21, 2015
Saving Is a Lot Like Yoga
Young people in the noon yoga classes here at Boston College bend, twist, or flatten themselves more easily than their much older classmates.
But older people are better savers – 50-year-olds save at more than double the rate of 40-year-olds – and perhaps yoga can explain how this happens.
In yoga, one doesn’t immediately balance into Warrior III without toppling over or find the upper-body strength for the Crow pose shown above. It takes practice to build the balance, strength, focus, or flexibility that each pose requires. Only with time do these pretzel-like configurations become less painful and more convincing. Poorly executed poses, practiced and repeatedly improved, are the only path to perfection.
Like yoga, saving is also a practice. …Learn More
July 7, 2015
College Debt = Student Stress
It’s hardly surprising that debt causes stress, but this condition seems rampant among the college crowd.
A new study in the Journal of Financial Therapy finds that nearly three out of four students feel stressed about their personal finances, and student loans are a big reason.
In 2012, the average graduating senior owed $29,400. Student debt has already been shown to be a barrier to homeownership and a cause of bankruptcy among young adults. Paying back the loans is also very difficult when borrowers don’t graduate and earn less in their jobs. Add stress to the host of issues that accompany borrowing for college.
Students who have debt or expect to be in debt after college – whether college loans, credit cards, or car loans – are “significantly more likely to report financial stress” than students who did not have any debt, the study reported. …Learn More