With consumer confidence at a six-year high and the stock market continuing to rock and roll, recording an all-time high again last week, one could be forgiven for thinking that all is well in the US economy, and that there is a promising future. Unfortunately, aggregate data often hides a much different reality behind the figures, as we shall see…
Just think about a wealthy neighborhood where there are 100 families living with an average annual income of around $400,000. Now suppose you live at the poverty line, which, for a family of four, is an annual income of $23,021. If you moved to the rich neighborhood, the new annual average income for the 101 families would be knocked modestly lower to $396,268. There’s no doubt the neighborhood would still be a very wealthy one, However, despite being part of it, you would still, sadly, continue living below the poverty line.
Many of the stats coming from the US government appear to be showing an improving economic condition, what with unemployment falling from 10% to 7.5%, consumer confidence rising to a six-year high and many other welfare indexes showing “improved” levels. But, when we dig into the data, we see a very different reality.
Only last week the Associated Press published a survey on the real America in an attempt to identify the real social profile behind the big numbers. According to the study, 4 out of 5 adults struggle with joblessness, live near the poverty line, or rely on welfare for at least some part of their life. This is what AP calls economic insecurity with the aim of more effectively measuring economic conditions.
In an economy full of ups and downs – just look at a S&P 500 chart since 1995, for example, lurching from bubble to bubble – any attempt at capturing a screenshot of the true social situation will off course result in an underestimation of the very serious economic risk haunting Americans. For example, the stats state that in 2011 only 12.6% of working-age adults lived in poverty and yet, a fully 40% will fall into poverty at some point in their life.
America is becoming a country of major inequalities, and it is growing. There is not so much a gap between the rich and the poor as a chasm. Good-paying manufacturing jobs – the backbone of Main St US are all but gone. The American dream is just that…a dream with not even modestly educated whites doing well. In fact, the study showed a rising level of pessimism among whites. Only 49% of whites think their children will do better than them while the number rises to 67% when the same question is asked to non-whites. Pessimism among whites has in fact climbed to the highest level since at least 1987, with 63% of them believing the economy is in a “poor” state. Economic insecurity amongst whites is on the rise, and more than 19 million now live below the poverty line.
The eroding economic security amongst the American population contrasts starkly with the current level of the stock market and is, to us, yet another indicator of a major disconnect between financial and real assets.