Most Americans, even wealthy ones, think the US economy is still in a recession. The gloom undermining confidence is expected to take a toll on holiday travel this year, and on consumer spending over the holidays. Retailers have responded by trying to push the holiday shopping season back into Thanksgiving Day.
By objective standards, the economy officially left recession in June of 2009; but most people would be surprised to hear it. It just doesn’t feel like a recovery, and here are five reasons why:
Only 54 Percent Invested In Stock Market
If you’ve had money in the stock market since 2009, you’ve enjoyed one of the greatest turnarounds in stock market history. Those who saw a 25, 30 or even 40% drop are back to even — and maybe a little ahead. But with 46 percent of the country not invested in the stock market, the recovery in equities goes largely unnoticed by nearly half of the country. For that 46%, nothing has really improved.
Corporate Cash Not Translating To Hiring
Big companies are awash in free cash and record earnings, but you’d never know it by listening to the tales of woe in quarterly conference calls. Corporate execs lack “confidence” in the economy, so instead of using those record profits and piles of free cash to call back workers laid off in 2007/2008, companies are using that money to buy back their own stock. Since most executive compensation is tied to share price performance, those at the top are doing really well. The 54% who are invested in the stock market also get some benefit — but not anyone else.
Wages Are Depressed
Unemployment remains stubbornly high, even after four years of recovery in corporate profits. The jobs being created are predominantly low-wage jobs in the service sector. It’s not unusual for young people today to routinely work two and three jobs just trying to make ends meet. The continued weakness in hiring and wage growth depresses consumer spending, which makes up roughly two-thirds of the US economy. Anything that discourages people from spending money is going to have a long-term depressing effect on the recovery.
Ballooning Student Loan Debt Drowning a Generation
Another obstacle to young people saving for retirement and taking their place as productive members of society is student loan debt. Many young adults are approaching their most economically healthy and productive years already in debt between $50,000 and $100,000. That’s a debt that can’t be discharged in bankruptcy court, and there’s no accountability for the educational institutions dumping unemployable workers carrying a load of debt on our economy. The very age group that tends to spend the highest percentage of their disposable income is handicapped by a load of student loan debt, money that goes back into government coffers and not the rest of the economy. Big debts also pressure young couples to hold off on starting a family, the future workforce and source of growth for our country.
Medical Bills Leading To Bankruptcy
Medical expenses are the number one cause of bankruptcy and, even if individuals avoid bankruptcy court, unexpected medical expenses can drain savings and cramp spending in other areas. Of those who file for medical bankruptcy, 75% had health care insurance. Millions of Americans are one accident or illness away from throwing in the economic towel. It’s not that we’re spending more time in the hospital or seeing more doctors — it just costs more here. Every former patient who files for bankruptcy protection is economically dead for at least 7 years. Having a bankruptcy on your record can lead to lower wages, higher costs for insurance, and fewer opportunities. Those otherwise productive citizens, whose only crime was getting sick, then contribute less to the overall economy.
Between crushing student and medical debt, depressed wages, and tepid hiring, it’s no wonder Americans are feeling less than zippity-doo-dah about the economic future. Many have been left out of the current recovery and, from their perspective, it feels like a recession.