Subject Line Ideas: The big number in the jobs report
Homebuyers lose a useful mortgage tool

Dumb 2-percenters (Funny)

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Feature Article: The big number in the jobs report

Critical Reads: Homebuyers lose a useful mortgage tool

The Funnies: Dumb 2-percenters

After it was revealed in the U.S. Department of Labor jobs report for May that employers were hiring fewer workers, the panic crept back into the minds of some. Was this apparently precarious economic recovery starting to come apart at the seams, or was this sobering report a mere blip? Well after a bounce-back in June and then another strong month in July, it would appear no panic is necessary. Jobs are still being added to the economy. But as good as it is, that’s not even the most important number in the latest jobs report.

If you’re ready, let's dig in...

The Big Number in the Jobs Report

The latest U.S. jobs report, released Aug. 3, revealed that companies added 255,000 jobs in July, following a robust June of 292,000 added jobs. Unemployment, the Labor department revealed, remained low at 4.9 percent.

But another analysis, done by the Bureau of Economic Analysis, actually showed the best number connected to the jobs situation in America.

That number is 2.6. That represents the wage growth in the past 12 months. The good news is that number keeps earnings growth slightly ahead of inflation. The bad news is that it’s not enough.

The average U.S. worker made 8 more cents an hour in June than in May, which seems OK, but later this year, when interest rates go up, so will inflation. And it’s going to do more than just eat up that extra 8 cents an hour in everyone’s pocket.

I’ve written before about wage growth and how important it is. It’s bigger than the number of jobs created or the unemployment rate. Sure, it’s awesome that the economy is adding jobs – more people with money to spend in an economy driven by consumer spending – but how much people are making at their jobs is what’s going to slow this economy down, not whether or not they have jobs.

The national median household income is somewhere around $54,000 right now. That’s less than it was during the recession. At first glance, there might be what some are calling a “jobs recovery,” but these jobs aren’t helping people’s bank accounts recover.

A family earning the median household income cannot buy a median-priced home. And yes, while it’s true home prices have risen rapidly the past few years as a drastically damaged industry corrected itself, the real problem – as I’ve written before – is on the earning side.

It’s a problem that people are making less money than they were in 2008. There’s very few people – mostly retirees, I’d guess – who in eight years of work would expect to be earning less money. It sounds almost absurd, doesn’t it? It’s going to become a bigger problem.

As I mentioned, this stagnant wage growth has gone hand-in-hand with flat inflation over the past few years. That means that even though people aren’t making any more money, they’re not really noticing it. TVs and computers are cheaper than they’ve ever been. Gasoline is really cheap right now. Even food prices, one area that HAS been climbing, aren’t putting milk and bread out of the average family’s reach.

Houses, yes, bread, no. Not yet, anyway.

When the Federal Reserve raises interest rates – yes, it’s “when,” not “if” – we’re going to be introduced to our old friend inflation. And you can be absolutely certain that with each passing month of reports that the economy is adding jobs, even though it continues to barely grow overall – at an annual rate of 1 percent, yippee – comes a better chance of the Fed raising rates sooner.

The Fed is not looking at what jobs are paying, just that jobs are being added. That 8 cents an hour might not help a family continue to afford that loaf of bread, but, by God, at least there will be MORE working families that can’t afford it. It makes so little sense.

This is the price we’re paying for the monetary policy so many thought was necessary to dig out of the worst financial crisis since the Great Depression. It’s inflation and tighter jobs markets that drive wages up. So when you tweak the dials to keep inflation down, you’re also keeping incomes down. I’m not an economist, so the answer is probably beyond me, but where is the net gain to the economy in that?

And not being an economist is probably why I don’t understand how the economy is supposed to grow overall when people stop being able to buy things because the prices of those things have grown far faster than the money they earn to buy them.

We can add all the jobs we want, keep plugging away at that quarter-of-a-million-a-month pace. Celebrate. Fist-pump. High-five your neighbors.

But just know that when they’re paying less than they were almost a decade ago, no number of jobs is going to matter that much.

Homebuyers Lose a Useful Mortgage Tool

You might think that a pre-payment penalty on a mortgage is a bad thing. It’s exactly as it sounds – you pay a penalty if you pay the loan off earlier than scheduled. After the foreclosure crisis, these penalties were regulated away, but the result isn’t all unicorns and rainbows. This Mortgage Professor column, via the Miami Herald, explains.

Co-Signing Gone Wrong

One of the easiest ways to help a family member is to co-sign on a loan for them. It’s not uncommon for parents to help their kids with student loans, car loans and even home loans. But if you’re asked to co-sign for someone, you need to make sure you’re 100-percent certain they won’t default. This Washington Post piece tells a precautionary tale of co-signing gone wrong.

The Lessons Learned from Seattle’s Minimum-Wage Hike

There is a lot of debate of late regarding minimum wages – how much they should be, who gets to decide what, and so on. Well, you might recall that Seattle instituted a minimum-wage increase a while back, and the city recently hired a group of economists to analyze the results. And you may or may not be surprised by what they found, this Investor’s Business Daily article points out.


Dumb 2-Percenters

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