Recently, I received a notice from my insurance company regarding the update for my health care policy. For the privilege of renewing my policy, the insurance company upped the premium 23%, despite the fact I didn’t use any medical services in 2015.
That got me thinking. Seven years after the financial crisis bottomed out, are we really better off? Are people getting jobs? Are they high-paying jobs? Do Americans have enough income to pay for sharp increases in health care costs or even rapidly rising food prices?
Turns out the answers are scary!
Why is that?
Well, job growth has slowed and Americans are broke.
We already know that the percent of Americans participating in the labor force is at a generational low! But I also recently read a research piece by TrimTabs, a respected institutional research firm that projects job growth using payroll data. They remove all of the fluff that is found in the government released jobs report. As a result, they provide a more realistic picture of what is happening in the job market.
According to TrimTabs, the economy added 120,000 to 150,000 jobs in December. This is down sharply from prior periods. They show job growth was 219,000 per month in 2015, compared with 224,000 in 2014.
And despite official BLS statistics showing strong months in October and November, TrimTabs shows that now the economy is producing sub-200,000 jobs for four consecutive months and the lowest level since February of last year.
So, what if Joe Sixpack is loaded and doesn’t need to work? That’s not the case either. It turns out we are pretty much broke. According to a survey by Bankrate.com, 63% of Americans have no emergency savings! Zilch.
The long-term trends are scary as well. According to the Federal Reserve, of those that had savings, 57% used them all up to get through the financial crisis!
What does this mean?
The U.S. economy is still 22% of the global economy. There’s an old saying that when the U.S. sneezes, the rest of the world catches a cold. Bring out the tissue paper! While the stock market may be near all-time highs, the increase in paper wealth hasn’t translated to the average American.
This is bad news because companies need people to buy things. It’s increasingly looking like a dicey proposition that corporate revenue and earnings will post strong growth going forward.
I think we are in for a period of earnings disappointments and stock market volatility because Joe Sixpack cannot bail out corporate America. It’s time to protect your wealth.
John Del Vecchio
Editor, Forensic Investor