Posts Tagged "economy"

Workers Stress about Inflation Spike

Emotional toll figureRegular working folks can always find something about their finances to be stressed about. But today’s stress is coming from a new place: a level of inflation this country hasn’t seen in four decades.

A large majority of workers – 76 percent – identified rising prices as having a negative impact on their finances. And among households earning under $55,000, 84 percent are feeling stretched, according to the financial services website Salaryfinance.com.

Nearly half of the 3,000 workers the firm surveyed in February specifically said that inflation is stressing them out, causing anxiety, depression, or both. They said the inflation makes it tough to afford basic necessities or save money.

Gas signThe stress is understandable. The consumer price index has risen 8.5 percent over the past year, and the increase isn’t just at the grocery store or the gas pump. A narrower measure of inflation that excludes food and energy is also up sharply – 6.5 percent for the year. Housing, another necessity, is driving up living costs too.

Workers got some protection from price hikes in 2021, because their wages were outpacing prices, according to the Wharton School. But those gains could disappear this year if inflation continues to accelerate.

Consumers are getting some relief from falling gas prices, which have declined for the fourth straight week, according to Gas Buddy. …Learn More

Small town square

Social Security Stabilizes Local Economies

Social Security’s great achievement for retirees is a guarantee that they’ll get a check every month, without fail. Less appreciated is the stability the program brings to local economies and businesses.

Retirees use their Social Security benefits to patronize establishments that sell goods and services locally such as restaurants, car repair shops, banks, and hospitals. That steady supply of spending in good times and bad helps to stabilize economies, according to research conducted by the Center for Retirement Research and funded by the U.S. Social Security Administration.

Between 2000 and 2018, working-age adults’ employment levels and earnings were less affected by the ups and downs in the state unemployment rate in counties where Social Security provides a higher percentage of residents’ total income.

During the Great Recession, for example, when unemployment rates surged across the country, earnings and employment did not decline as much in counties that were more reliant on the federal retirement benefits.

The researchers’ analysis of U.S. Census data produced similar results when they tested Social Security’s stabilizing effects on specific industries that sell locally. Businesses in several industries – retail and entertainment, healthcare, education, financial services, and other services – had more stable employment and earnings when county residents got a higher percentage of their total income from the program. Manufacturers, which tend to sell their products nationally or internationally, were excluded from the industry analysis.

Social Security’s regularity and reliability set it apart from the countercyclical federal programs that were designed to ease the pain of recessions, such as unemployment benefits or food assistance distributed through the Supplemental Nutrition Assistance Program.

Social Security, the researchers concluded, serves as a valuable “stabilizer for the local economy, above and beyond its direct value to beneficiaries.”

To read this study, authored by Laura Quinby, Robert Siliciano and Gal Wettstein, see “Does Social Security Serve as an Economic Stabilizer?”Learn More

The Cares Act

CARES Act’s Loan Forbearance is Working

As the pandemic was sinking into our collective consciousness a year ago, Congress, fearing economic calamity, allowed Americans to temporarily halt their mortgage and student loan payments.

By the end of October – seven months after President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act – Americans had postponed some $43 billion in debt, including car loans and credit cards, which many lenders deferred voluntarily. Billions more are still being added to the total amount in forbearance.

Fast action in Congress “resulted in substantial financial relief for households,” says a new study by researchers at some of the nation’s top business schools. Their recent analysis found that the assistance went where it was needed – to “financially vulnerable borrowers living in regions that experienced the highest COVID-19 infection rates and the greatest deterioration in their economic conditions.”

When lenders grant forbearance they agree to waive their customers’ debt payments for a specified period of time. For example, Congress said borrowers could request that their payments on federally backed mortgages be deferred by six months to a year.

Although forbearance was less visible than the checks taxpayers also received under the CARES Act, the financial lift was equally potent. Customers who received loan forbearance saved an average of $3,200 just on their mortgages last year – this compares with $3,400 in stimulus checks for a family of four.

Congress also automatically suspended all payments on federal student loans, saving borrowers an average $140 last year, and President Biden has just extended the forbearance until at least Oct. 1. Lenders, in an attempt to prevent massive loan defaults on their books, voluntarily gave consumers a break last year on two types of loans that weren’t part of the CARES Act: automobile loans ($430 saved) and credit cards ($70 saved).

Forbearance is only temporary relief, because the missed payments will eventually have to be made up. But in a telling indication that borrowers didn’t want to fall behind, just a third of the people who asked for debt relief actually used it. In these cases, forbearance “acts as a credit line” borrowers can draw on – if they really need it. …Learn More

Art of a large group of people

Privilege in the Age of the Coronavirus

I appreciate how privileged my husband and I are that we are able to remain in our home, where we feel fairly safe.

He is a retired Boston high school teacher. I have a good job that also provides me with some degree of flexibility when needed, and my boss didn’t resist, because of my autoimmune condition, when I asked to work at home early last week.

A young couple in my condo building with a new baby fled last weekend to a relative’s house in rural Connecticut, where the husband will be able to telecommute to his high-paying job in Boston.

Yes, our 401(k)s are getting pummeled. But this national crisis is immediate and far more consequential for the millions of Americans who must work even in a pandemic. Workers have two concerns, and they are intertwined: health and money.

Think about the first responders, service-industry workers, or post office employees who are in contact with the public, constantly exposing themselves and, as a result, their families to the coronavirus.

Low-income people are also very vulnerable. Research shows that they are less healthy for reasons ranging from less access to employer health insurance to higher rates of smoking and obesity. Diabetes is more pervasive in low-income populations too.

Yet public health officials tell us that people with underlying conditions are far more vulnerable to getting seriously ill if they contract the virus – and these are the same people who usually don’t have the luxury to telecommute. Many low-income workers also live in crowded conditions, often with older relatives in fragile health.

Many workers are grappling with the realization that the economy is starting to slow down – and they will be the first to feel it. Consider the cleaning ladies or dog walkers whose clients are asking them not to come to the house this week or the servers at the restaurants shutting down in Manhattan, Massachusetts, Illinois, and across the nation. …Learn More

People in their Prime are Working Less

Line graph showing labor force participation since 1990The decline in Americans’ labor force activity started around the year 2000 and accelerated after the 2008-2009 recession. Labor force participation is now at its lowest level since the 1970s.

The main reason for the drop is our aging population. But the news in a systematic review of current research in this area is a more troubling trend that’s also driving it: people in their prime working years – ages 25 through 54 – are falling out of the labor force.

Prime-age men are the most active members of the labor force. Yet in 2017, only 89.1 percent of them were either working or seeking a job, down from 91.5 percent in 2000, according to the review by University of Southern California economists.

Prime-age women’s labor force activity also fell, to 75.2 percent in 2017 from about 77 percent in 2000. This decline ends decades in which women were streaming into the nation’s workplaces at an increasing rate. One possible reason for the leveling off is the scarcity of family-friendly policies, including more generous childcare assistance.

The forces pushing and pulling various groups in and out of the labor force make it difficult to pin down the primary reasons for the overall drop in participation. The decline among prime-age men and women may be tied to opioid addiction, alcoholism, and suicide. Other studies point to the surge in incarcerations of black men.

And while technological advances like robots and growing trade with China have increased the need for many highly skilled workers, they have reduced the demand for less-educated, lower-paid people, including U.S. factory workers, in their peak working years. The resulting fall in their wages has also made work less attractive to them. …Learn More

Photo of an older white man

Why are White Americans’ Deaths Rising?

Rarely does academic research make a splash with the general public like this did. A grim 2015 study, prominently displayed in The New York Times, showed death rates increasing among middle-aged white Americans and blamed so-called “deaths of despair” like opioid addiction, suicide, and liver disease.

Rising mortality, especially for white people with low levels of education, ran counter to the falling death rates the researchers found for Hispanic and black Americans. The husband and wife team who did the study proposed that “economic insecurity” might be an avenue for research into the root cause of white Americans’ deaths of despair.

A 2018 study took up where they left off and found a connection between economic conditions and some types of deaths. Researchers from the University of Michigan, Claremont Graduate University, and the Urban Institute said poor economic conditions – in the form of local employment losses – have played a role in the rising deaths since 1990 from chronic health problems like cardiovascular disease, particularly among 45 to 54 year olds with a high school education or less. However, they could not establish a connection to the rise in deaths of despair.

In a 2019 study in the Journal of Health and Social Behavior, these same researchers instead focused on what is driving the growing educational disparity in life expectancy trends among whites: life expectancy is rising for those with more education but stagnating or falling for less-educated whites.

As for the health reasons behind this, they found that chronic conditions like cardiovascular disease and even cancer are critical to explaining less-educated whites’ life expectancy, and they warned against putting too much emphasis on deaths of despair. In the medical literature, they noted, cardiovascular disease, and some cancers are consistently linked to the “wear and tear” on the body’s systems due to the stress that disadvantaged Americans experience over decades, because they earn less and face adversities ranging from a lack of opportunities and inadequate medical care to substandard living environments. …Learn More

A Taste of How the 1 Percent Lives

The dramatic increase in U.S. inequality is due almost entirely to the expanding fortunes of the
1 percent. They have tripled their share of the nation’s total wealth to 21 percent since the 1970s.

Such extreme concentrations of wealth are of growing concern to economists and even one Wall Street firm. They argue that it hurts the economy for everyone.

The public’s reaction couldn’t be more different. Their preferred solution to barely coping financially is to become rich themselves. Two out of three Americans told Gallup they aspire to being rich and say that the super-wealthy are good for the country. Democrats and Republicans are equally enamored of the rich.

Mansion in Naples, FLWhat it means to be in the top 1 percent is, for most of us, an abstraction since the wealthy largely keep to their own. But the crew of the Double Sunshine tour boat are happy to show tourists the lifestyles of Florida’s rich and famous during daily tours of the dolphins and multimillion-dollar mansions on Naples Bay.

During my Christmastime tour of the bay, the crew pointed out one property where the new owner had demolished a $49 million house to build a new one. “Tear-downs are on a tear,” says The Naples Daily News, which closely follows the real estate transactions of celebrities and chief executives.

In property after property, royal palms sway over lawns that tumble into the bay. Every house has a yacht or an empty boat slip with a full crew awaiting the owner’s return, said Greg Dyer, the tour boat company’s assistant operations director. One homeowner pays nearly $600,000 a year in property taxes. No wonder Naples has such great bike paths. …Learn More