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John Hussman writes a wonderful weekly note about the markets and government policy. He made one of the more remarkable observations I’ve heard in many years in his note this week:
Last week, we observed “Real income declined month-over-month in the latest [Department of Labor] report, which is very much at odds with the job creation figures unless that job creation reflects extraordinarily low-paying jobs. Real disposable income growth has now dropped to just 0.3% year-over-year, which is lower than the rate that is typically observed even in recessions.” It wasn’t quite clear what was going on until I read a comment by David Rosenberg, who noted that much of the recent growth in payrolls has been in “55 years and over” cohort. Suddenly, 2 and 2 became 4.
If you dig into the payroll data, the picture that emerges is breathtaking. Since the recession “ended” in June 2009, total non-farm payrolls in the U.S. have grown by 2.32 million jobs (establishment survey, or 2.03 million using Household survey figures). However, if we look at workers 55 years of age and over, we find that employment in that group has increased by 3.04 million jobs. In contrast, employment among workers under age 55 has actually contracted by nearly one million jobs, regardless of which survey you use. Even over the past year, the vast majority of job creation has been in the 55-and-over group, while employment has been sluggish for all other workers, and has already turned down.
Think about that. It means that since the “recovery” began, the ONLY GROUP for whom employment is up is that group which has been driven to desperation by government policies. For everyone else, employment has not risen. It has FALLEN. Stunning.
What does this mean? Hussman explains how the elderly have been impacted in recent years:
FIRST, the Fed has kept interest rates at ridiculously low levels. So savers can’t earn any income. (Note that the Fed has FULL CONTROL over short term rates.) Essentially, the Fed has engineered it so that we earn nothing on savings, despite the fact that inflation is running at 2-3%, and despite that fact that the federal government is borrowing enormous sums every year. This is a massive stealth tax on people who do the “right thing”- who save.
SECOND, the value of home owned by the elderly has crashed. The housing boom was caused largely by misguided government policy, and for sure the length and depth of the bust has been directly due to government policies.
THIRD, investment portfolios of the elderly have gone essentially nowhere in recent years. The DOW was at about 12,900 in April of 2007; five years later it is at the same level.
I might add a fourth reason why the elderly are going back to work. They know that federal and state governments won’t be able to meet their commitments to pay pensions in the amounts and durations that they have promised.
But beyond the why, the FACT is that employment for those under 55 has FALLEN during this recovery. The only group for whom employment has risen is the group of desperate retirees forced back to work.