Peddling Non-Fiction: Here Are The Facts About America’s Disappearing Middle Class

Posted: June 13, 2016 in Uncategorized
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Obama calls it “peddling fiction.” For the rest of America, it’s called reality, and it is getting uglier with every passing day.

The fact that the government and some economic “experts” continue to tell Americans that the economy is healthy, or, even “better off” since the financial crisis is mind numbing. As we succinctly showed with just 9 charts recently, nothing could be further from the truth.

There is undoubtedly a narrative being reported by the media that “everything is fine”, it’s ok to go back to sleep now. However that’s not the case, and for many, if not most Americans, it’s an every day reality that things are not fine.

A recent piece by the AP takes us through a few realities of this errant message the media has been giving everyone.

The article points out the fact that overall income growth is being skewed by the fact that the richest are seeing large increases, while the poor are seeing actual income decline. A point we have discussed many times when referring to the growing income inequality that the Federal Reserve has decided to accelerate. And that jobs “recovery” – mostly part-time and low paying opportunities, as we have also pointed out.

Consider incomes for the average U.S. household. They ticked up 0.7 percent from 2008 to 2014, after taking inflation into account. But even that scant increase reflected mainly the rise in income for the richest tenth of households, which pulled up the average. For most others, incomes actually decreased — as much as 6 percent for the bottom 20 percent, at a time when the economy was mostly recovering.

 

Or consider employment. The U.S. economy has added a healthy average of roughly 200,000 jobs a month since 2011. Yet most have been either high-paying or low-paying positions. By the end of 2015, the nation still had fewer middle-income jobs than it did before the recession, according to the Georgetown University Center on Education and the Workforce.

 

That reflects what economists call the “hollowing out” of the workforce, as traditional mid-level positions such as office administrators, bookkeepers, and factory assembly-line workers are cut in recessions and never fully recover their previous levels of employment.

 

Part-time jobs surged in the recession, too, and remained high in the recovery, even while full-time work was slower to return. The number of full-time jobs has risen just 1.3 percent since December 2007, when the recession officially began. Part-time positions are up more than 12 percent.

 

In Memphis, hiring resumed after the recession and the unemployment rate has dropped to match the national figure of 5 percent. But jobs in low-paying industries, such as retail, restaurants and hotels, are the only category to have fully recovered from the recession, according to Moody’s Analytics. Higher- and middle-paying jobs still trail their pre-recession levels.

Any rebound from the recession also is felt in different geographic regions as well. As we noted, jobs are growing more around certain metro areas, leaving everyone else without any real job opportunities, indeed the hollowing out of an ever shrinking middle class.

In Millington, a Memphis suburb where Trump held a rally in February at a military airfield, residents complain that most of the available jobs are in the fast-food chains that dot Highway 51, the main thoroughfare.

 

The rebound from the recession has been felt in vastly different ways not only by income levels but across geographic lines. Areas like Las Vegas that still bear deep scars from the housing crisis have lagged behind the nation’s recovery. So have cities like Memphis that need robust consumer spending to fuel growth at the shipping and logistics firms that form the backbone of its economy.

 

By contrast, cities like Seattle, Denver and Austin, Texas, with heavy concentrations of information technology, management consulting or other highly paid services, have enjoyed a disproportionate share of the job and income growth.

 

In other words, the richest places in the country are making the economy look better than it actually is, while places like Memphis stagnate.

 

In the first half of the recovery, jobs grew 5.6 percent nationwide. Yet in the wealthiest one-fifth of zip codes, hiring jumped 11.2 percent, according to the Economic Innovation Group think tank. For the rest of the country, total jobs increased just 3.3 percent.

 

“It’s hard to find an average city,” Tannenbaum says. “There just aren’t a whole lot right in the middle.”

 

The same is true for households. These data suggest that the post-World War II trend of a steadily growing middle class, lifted by broader national prosperity, is reversing.

 

Slightly fewer than half of American adults now fall in the middle-class camp, according to the Pew Research Center, a vast shift. In 1971, 61 percent of households were middle class, according to Pew, which defines middle class as income between two-thirds and double the median household income.

 

And while home prices have risen nationwide since 2012, they’re still below their boom-era levels in most parts of the country. Since most middle-class wealth is in home equity, those families are poorer than they were before the recession.

 

By and large, more affluent Americans are the ones who hold stock — and stock prices are back near record heights.

What this has led to is a strong support of candidates who are not perceived to be part of the establishment, specifically Donald Trump. Those that hear Trump’s message on jobs can relate whole-heartedly, and are hopeful Donald can be the one to fix what ails the country.

Trump’s candidacy, in particular, has been driven by support in some of the most economically distressed regions in the country, where jobs have been automated, eliminated, or moved to other states and countries. It’s in these places that the outsider message of an unconventional candidate promising a return to the way things used to be resonates most.

 

Mike Williams voted for Trump in Tennessee’s March primary, which the billionaire won easily. To many, it would seem that Williams is doing pretty well — he earns $22 an hour as a maintenance worker at an Owens-Corning factory, along with health care and retirement benefits. But his hourly pay has only recently returned to where it was a decade ago, when he worked as a welder.

 

“I feel like I’m going backward rather than forward,” Williams, 51, said on a recent afternoon after finishing his shift.

 

One reason he backed Trump, he said, is that he feels less secure than in the past, when more manufacturing work was available.

 

“I remember when you could quit a job today and go to work somewhere else tomorrow,” Williams said. “There was always someone hiring.”

Struggling families such as the Brigida’s are also supportive of Trump, because they’re tired of being told how wonderful things are by everyone when they live a completely different reality.

In Las Vegas, which is still recovering from its huge housing boom and bust, Tracy Brigida’s husband, Michael, last summer lost his second job in three years. Tracy, 48, has been paying the bills by substitute-teaching while raising their two children, one of whom is autistic and is home-schooled.

 

They still owe more on their Las Vegas home than it’s worth, having bought it nine years ago. They hoped it would build wealth for their retirements. Now, it’s a money pit.

 

The couple initially supported Wisconsin Gov. Scott Walker’s presidential campaign. But after Michael’s latest layoff, they switched to Trump.

 

Families like hers, she says, seem forgotten in the celebration of rosy national economic averages.

 

This administration wants to tell us the economy is better and people are getting jobs,” she said. “But that’s not my experience.”

* * *

We’ll let Chris Rice, a 29 year old who has worked steadily in the Memphis region for the past 10 years, all at temporary jobs sum it up: “I’d love to have a permanent job. I’m tired of going from temp agency to temp agency when there’s no work.”

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