Let’s continue our discussion of economic fault lines. This week’s topic is government spending. Last year, the economy was infused with a nearly $800 billion stimulus package. This gave help to state and local governments, funded public work projects, and helped troubled industries. Much of that money is due to run out just as state and local governments are nearing the end of their fiscal years and faced with budget-balancing. Lawmakers in several states are considering raising sales tax and property tax, and cutting government programs. At the same time, jobless benefits are starting to run out for some of the long-term unemployed, who are hitting the 99-week maximum. A million unemployed could have their benefits run out by the end of this year. This will not help our economy.
Congress has delayed approving more money to cover Medicaid costs for states. Medicaid, which covers more than 60 million people nationwide, is one of the costliest services states provide. And with the severe recession, more Americans have turned to Medicaid for assistance. State tax revenues were lower last year as well, so deep budget cuts will have to be made. The federal share of Medicaid was increased last year as part of the stimulus program, but this funding will run out at the end of December.
This could mean trouble for the economic recovery. Thousands of state, county and local government workers could be laid off in the name of budget-balancing. More unemployed workers will do nothing to help the economy. Thanks for reading.
A couple of weeks ago I mentioned there was a Retirement Confidence survey that was completed by the Employee Benefits Research Institute. This survey found that only 16% of workers feel very confident they will have enough money for a comfortable retirement. And, only 29% of workers are very confident they will have enough money to pay for just their basic expenses during retirement.
After reading through this national study, my curiosity was aroused and I wondered what the feelings were of people in our area. So, for the past couple of weeks, I ran a Retirement Survey of my own to survey retirees in the Illinois/Wisconsin Stateline area and this is what I learned:
- Average age of survey responders: 70 yrs
- Average age responders retired: 60 yrs
- When asked why they retired, the most common answers were: being tired of working, feeling worn out, and just not wanting to work anymore
I find this to be a big issue. If you haven't saved enough to retire, then you shouldn't retire. Keep working. If you are burned out at your current job, then find another job. You shouldn't choose to retire unless you're financially ready. In my opinion, age sixty is too young to retire. Most of us (me being included) boomers don't get full social security until age 66 and 6 months! I understand there are some unfortunate circumstances that don't allow some people to continue working, however, if you can work until age 66 ½, I would highly recommend it.
- 60% of responders performed retirement projections prior to retiring
- What percent is your retirement income compared to your pre-retirement income? Average response was 72%
- 94% of responders have health insurance other than Medicare
- Two-thirds of people surveyed adjusted their life-style and spending habits after retirement.
- Responders were asked to provide advice to people who are still in the workforce regarding retirement: the number one piece of advice was to save. Save more, start saving earlier, and learn to live with less.
If you're afraid you won't have enough saved, then start adjusting your spending habits now. Putting aside enough for retirement is a daunting task that takes planning and discipline. Save as much as you can. And take advantage of employee retirement plans and matches.
- Greatest monetary concern of those surveyed was the cost of healthcare
As these costs continue to rise, many are worried about having enough money to pay for insurance premiums.
If you are interested in viewing the complete results of the survey click here. Thanks to those of you who took the time to complete my survey.
This week is Thanksgiving-a time for reflection and gratitude. I'm going to give you the top ten things to be grateful for.
Number 10 - Your job. With unemployment rates as high as they are, it's more important than ever.
Number 9 -Clean air to breathe and clean water to drink. Not everyone is as fortunate as we are.
Number 8 -- Honesty and Integrity. With all the dishonesty in the world today, let's appreciate the honesty and integrity that we deal with on a daily basis.
Number 7 - Coworkers. I appreciate the people I work with; you should do the same.
Number 6 - Medical personnel - Doctors, nurses and support staff. They are there when we need them; let's appreciate them also.
Number 5 - Our military, both past and present. Their lives are on the line, let's be thankful for their commitment to serve our Country.
Number 4 - Your health - Nothing is more important. Without it life can be miserable; be grateful for good health.
Number 3 - Our country - Freedom is a blessing none of us appreciates enough. We can go to bed without worrying about foreign attacks; not everyone is that fortunate.
Number 2 - The rebounding economy. Although it is moving slowly, it is still moving in the right direction.
Number 1 - Friends and family - What can I say? It all starts and ends here. Appreciate the people you care about.
I'm also thankful for your interest in my blog. Have a Happy Thanksgiving.
The last few weeks we have been discussing what's coming in 2010. We've covered GDP, interest rates and finally the banking crisis. Today, we are going to discuss jobs!
Jobs. They are important to all of us. The national unemployment rate is currently at 10%. It has slowly risen this year and is projected to continue rising into the first half of 2010. Could we see 12%? Maybe. Hopefully not.
Locally in the state line area, we have seen our unemployment rate skyrocket way past 15% in both Rock and Winnebago Counties. I recently read an article that said that the national unemployment rate formula was changed in the early 1990's. The article went on to say that if we still used the old formula, we would already be at a national unemployment rate in excess of 15%. The change in the formula dealt primarily with no longer counting people who have given up looking for a job. This is a large part of the currently unemployed. These people have lost their jobs, are on unemployment and have at least temporarily given up looking for a new job. As they have given up, they are still unemployed. Jobs have now become our #1 economic problem.
Let's hope as the economy slowly comes out of the Great Recession jobs will grow and the unemployment rate drops. Jobs are essential to economic growth, and these jobs need to be private sector jobs, not government jobs!
This week we are going to cover some positive and negative points in the economy.
Let's start with some positive trends that are occurring:
- Consumer sentiment has slowly risen from its low in November 2008. This means that we, as consumers, are feeling better about the future than we were a year ago.
- Jobless claims, although high, have been declining over the summer months. A few months don't make a trend but they are headed in the right direction.
- Interest rates- We remain at historically low levels and until the economy recovers, they will remain low.
Now, let's look at the barriers that currently exist:
- Federal spending, which I have covered in the past and will discuss again next week, is a huge problem. This deficit will cause future problems if we don't get it under control. Inflation will be an obvious problem as a result of runaway spending.
- The banking crisis is not going away and will continue for some time. We have had 92 bank failures as of last Friday, though not the record yearly total of 181 in 1992; this remains a problem. There are currently 416 problem banks in the FDIC's watch list, up by 117 from the same time last year. Stimulus money has helped but it will not solve the problem. This banking problem means that credit will remain tight for quite some time.
- The third issue is still jobs. Unemployment on a national scale is hovering in the 9% range and is expected to hit double digits by year end. For the job picture to improve, we need the economy to improve.
Some good news and some not so good news. Hang in there, business cycles will occur and the economy will improve.
If we look at the economic tea leaves for the remainder of 2009, here's what economists are generally predicting:
The worst is over! The economy is transitioning from a steep recession to recovery. Let's hope they are right on this one. Here's a break down of their projections:
- Jobs - Unemployment, currently in the 9% range, will creep up to double digits in the 10+ range. There appeared to be a leveling off of initial claims in May, which suggests that yes, people are still losing jobs, but at a slower rate than earlier this year.
- Interest rates - Possibly bad news for homeowners. Even though the Fed is committed to keeping rates low, it looks like they are going up before year end. It certainly appears that they could be up by 1% or 100 basis points.
- Home sales - the free-fall in home prices has stopped, but sales will remain slow.
- Economic growth - The economy shrunk at an annual rate of 5.7% in the first quarter of 2009. Projections are that this is the worst quarterly drop for the year. We should start to see some growth by the fourth quarter.
- The stock market - No matter how we measure the equity markets, they are all up significantly since their March 9 bottom. This is definitely a leading economic indicator.
Good news? Definitely some. We could use some, especially if you are one of the unemployed.
For the next few weeks I'll try to tackle some of the issues that are keeping us up at night. Things like keeping our jobs, the struggling economy, having enough money to pay the bills, our shrinking retirement accounts, keeping our homes, health care and our standard of living. These are enough to keep me up!
Right now, I think employment is on all of our minds, and understandably so. Here are the facts: the national unemployment rate is currently 8.1%, a 25 year high. This time last year, the rate was almost half its current level. The Stateline area has been hit particularly hard. The jobless rate for Winnebago County is approximately 12%, Beloit 15% and Janesville 12%. These numbers are higher than the national average due primarily to our reliance on the auto industry. Projections tell us that the unemployment rates will continue to grow for a few more months.
While these figures might seem grim, it's important to remain optimistic and remember that there are ways to help protect your job if you have one and to get back out there if you've been laid off. Believe it or not, companies are hiring. Check out these links for some helpful tips:
CNN: 8 Ways to Recession-Proof Your Job
ABC News: Tips on Securing a Job During Tough Economic Times
If you have any employment tips of your own that you'd like to share with other readers, please feel free to post them here!