Good news and bad news

The good: Initial jobless claims last week were at their lowest level in three and a half years, back to May 2008, before the financial panic hit and before the recession had been declared. The four-week average is at its lowest level since July 2008. Last week’s number still looks high (366,000), but keep in mind that even in good times the number is usually over 300,000 — layoffs are a regular feature of the U.S. labor market. It should also be noted that unlike the recent drop in the official unemployment rate (from 9.0% to 8.6%), this improvement is not mostly an artifact of unemployment people giving up on their job search and dropping out of the labor force. These are initial claims for unemployment insurance, by people who previously were working. So if this number is down, then either there were fewer layoffs or (less likely, I’d think) fewer laid-off workers bothered to apply for unemployment insurance.

The bad: Nearly half of Americans (48%) are either poor or near-poor, according to new Census data. That includes 49 million who are classified as living in poverty, plus 97 million who are classified as “near poor,” defined as having an income between 100 and 200 percent of the poverty line. Once upon a time many people would dismiss Census poverty data by noting that they failed to include government welfare spending and other anti-poverty tax and transfer policies, and also failed to adjust for the huge variation in the cost of living in different regions of the nation. But the new figures reflect the recently revised Census methodology, which answers those objections. One might also object that the low-income threshold is actually quite high — $45,000 for a family of four — but I would guess that the objectors have not tried to support a family of four on that amount lately. The AP article quotes Robert Rector* of the Heritage Foundation with the old conservative argument that many of these people have TV’s, cars, and houses, ergo they’re not really materially deprived, but I think he’s missing a couple things:

  • Poverty is a relative measure as well as an absolute measure. Yes, $45,000 would have been opulence for, say, a family in colonial America (which apparently had the highest standard of living in the world at the time). But colonial families grew their own food, spun their own cloth, and were otherwise generally self-sufficient. Also, yesterday’s luxuries often become today’s necessities. For example, two decades ago I spent about $25 a month to stay connected, in the form of basic landline service. Today, staying connected costs me about $350 a month, for cable TV and Internet, cellphone, etc. You can live without all those things, but when everyone around you has them, you will know deprivation. Just because it’s a social construct doesn’t mean it’s bogus.
  • The burden of consumer debt: Entering the recession, consumer debt was at an all-time high relative to income. Household debt service payments averaged 14% of income and about 28% for renters. Since the recession began, many households are obviously much poorer and finding it much harder to make those payments. Many have, of course, not merely fallen behind but lost their houses and other collateral. The overall debt-service-to-income statistics show that households are successfully deleveraging,with the number down to 11%, but the average surely hides a lot of variation. I expect debt is weighing very, very heavily on most near-poor households — those that still have their houses, that is.

When members of a household are unemployed or underemployed, they are probably just barely keeping up with the living standards of the community or even their own living standards of a couple months or years ago. It’s gotta be painful. Pundits and politicians ignore that reality at their own peril.

(*Also the same person from whom I first heard the suggestion that government policy on poverty should be based on the words of the apostle Paul in 2 Thessalonians 3:10: “That if any would not work, neither should he eat.” I last heard it from Michele Bachmann.)

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5 Responses to “Good news and bad news”

  1. The Daily Climb « georgesblogforum Says:

    [...] http://moneyandblogging.wordpress.com/2011/12/15/good-news-and-bad-news/ [...]

  2. Larry Says:

    Good Post. The real fear is what happens when Euroland slips into recession (or worse) while China is attempting to stamp on inflation? The U.S. may be teetering on recovery (though I would still submit that no policies that have any significant impact on our long term fiscal deficits have yet been put in place) but it will take but a strong wind to knock the U.S. back into recession. Then what of those “near poor”? Keep your eye on the OWS movement, it may be out of the headlines, but is far from halted.

  3. Mark E. Says:

    Very good point about certain technology not being a bogus social construct. To at least some degree, we all increasing will need tech skills and access to the services they provide to be able to find a job and feed ourselves. I’m sure even Michelle Bachman would agree with that.

  4. The Daily Climb-Thursday, Dec. 15th, 2011 | The Daily Climb-Daily Posting Of Relevant Content Says:

    [...] http://moneyandblogging.wordpress.com/2011/12/15/good-news-and-bad-news/ [...]

  5. Elizabeth Says:

    I guess I am “near poor.” I support a family of four on $45,000 — barely. You made a very good point about the pain of not being able to keep up living standards previously enjoyed, or living standards of the community. This is partly the non-bogus social construct of what it takes to keep up with technology and be connected these days, and partly that I am aware of how much my family is doing without, compared to what I had hoped to provide for them, and how I grew up: an occasional trip to the beach, a pet, occasional sending out for pizza, occasional trip to the movies, regular haircuts, after school activities and lessons, a prom dress… these are all things which I am currently not available to provide, yet to outsiders who think I am not poor because I have a car, a house, and a television and cellphones, I wonder what kind of quality of life you all think we should be living? I work to provide food and shelter and that’s about it, it seems. I wish I could afford to buy my kids a dog, for crying out loud. Some people think I’m a “hippie” because I have let my hair grow long… but actually it’s because I cannot afford to go to the salon to get it cut. I do a lot of faking that I’m making it, these days. I wonder how many of us are out there, pretending we are doing much better than we actually are. But quietly panicking.

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