Washington, DC -- (ReleaseWire) -- 11/11/2015 --It's November, when our thoughts turn to the upcoming holidays, especially Thanksgiving, and Thanksgiving calls to mind Norman Rockwell's iconic painting of the celebration, with three generations gathered around a table while the white-haired grandmother presents a beautiful roast turkey for the feast. You may know this painting as The Thanksgiving Picture, or even I'll Be Home for Christmas, but its original title reflects the article it accompanied in the Saturday Evening Post in March of 1943: Freedom from Want. Rockwell created the image as part of a series of four paintings inspired by Franklin Delano Roosevelt's 1941 State of the Union address, where he laid out four fundamental freedoms that people "everywhere in the world" should have: freedom of speech and worship, and freedom from want and fear. Like most of Rockwell's best-known images, Freedom from Want is aspirational, a combination of fantasy and reality, which is what makes it so compelling.
Why am I starting this article with an Art History 101 lecture? It's that last point, in particular, that Freedom from Want is the supposed "real world" seen through the spectacles of fantasy, which resonates over and over as we look back on last week and its implications. Let's start with the biggest headline grabber: the Bureau of Labor Statistics released its October payroll jobs numbers on Friday, announcing a remarkable 271,000 jobs created, well over the consensus expectation of 184,000. This was the highest print since December of 2014, and those new jobs dropped the headline unemployment rate to 5%, the lowest since April of 2008. If these numbers are the reality, then that is one lovely Thanksgiving turkey for the economy, isn't it?
Well, yes. And media and government alike are sure to focus on those two numbers. But as always, when we look beneath the headlines, the picture is much less certain. For instance a full 54%, or 145,000 of those jobs were added to the total because of something called the birth-death model. The birth-death ratio is a number representing the net jobs provided from newly started business vs. business closings during the reporting month. The BLS uses a rolling average to determine the monthly total based on historical averages over the past several years. That sort of math assumes an economy that is functioning normally, which ours has certainly not been for the past seven years, and so that figure of 145,000 jobs is, simply put, fiction.
Even aside from that, looking further into the details we can see disturbing trends within the overall picture. According to BLS, who got those jobs? All 271,000 plus some can be accounted for by employees age 55 or over, while males between 25 and 54 lost 119,000. Also, multiple job holders increased by 109,000. Taken together this leads to the conclusion that older Americans are taking part time jobs, and some of those losing full time work are taking multiple part time positions to compensate. And where are the jobs? Again according to the BLS, not one is in manufacturing. Most are low-paid personal services jobs: retail, food service, temporary work, and health care services. These jobs certainly don't provide for a family, much less put a luxurious feast on the Thanksgiving table.
It's not hard to see from these numbers that young people aren't in the position to build households or plan for the future. In fact, fully 50% of 25-year-olds live with their parents. Where will this cadre be in ten years, or forty, when they reach the traditional retirement age of 65, if they can't truly begin their financial lives now? The numbers also point to another trend: older people are working longer as the American fantasy of retiring to a life of traveling and sipping cocktails slips further and further into the rear-view mirror. The U.S. Government Accountability Office recently released analysis indicating that half of American households at age 55 have no money saved for retirement. No money, no margaritas. And Northwestern Mutual's 2015 Planning and Progress Study reinforces the point with the conclusion that retirement at 65 years of age barely exists anymore.
Of course, the markets react to the headlines, not the nuances, and so the Dow closed up 46.90 points on Friday, leaving the index standing at 17,910. The S&P 500 closed at within one percent of its all time high. Looking under that surface, though, shows that there's no real volume and the underlying breadth of the market is still a disaster, when you look at the individual stocks making up the indices. Still, the pundits are predicting on the strength of these employment numbers that the FOMC will raise interest rates at their December meeting.
Will they, though? Donald Trump called Janet Yellen out on the lack of action on interest rates in a press conference last week, saying, "...in my opinion, Janet Yellen is highly political. And she's not raising rates for a very specific reason: because Obama told her not to." Whether or not that's true, she has to be cognizant of at least one huge elephant in the room when it comes to interest rates. The United States is the world's largest debtor, and getting larger yet, since Congress has raised the debt ceiling from $18.5 trillion to $20 trillion. Currently, the annual interest on U.S. national debt is approximately $400 billion, and a one percent increase in interest rates would raise that figure by 50%, to $600 billion. With that in mind, does it make sense in Janet Yellen's world to raise the rates? Seems unlikely.
Our current system is unsustainable, and we should be making decisions about what will replace it, just as individual investors should be looking at Plan B, Plan C and maybe even Plan D. Starting in the 1980s, we were sold the idea that pensions were a thing of the past and that individual 401k plans were the way to go. "Save for 30 years and retire a millionaire, just like your friends on Wall Street!" Instead, recent surveys show that, if not for Social Security, nearly half of all retirees would be on the street. If there's a correction not just to the market but the system itself, if your public pension or private retirement account stops paying you, what will you do? A good Thanksgiving meal isn't just the turkey, it's the stuffing and the green bean casserole and the mashed potatoes and those incredible rolls mom bakes. In the same way, a good retirement plan needs to take into account the whole picture of a life well lived. Have you diversified your investments? Maybe planned ahead for a job you can do happily in your later years, something that interests you? Start asking those questions, making those plans now, and it will serve you well in the long run.
All data sourced through Bloomberg.
Securities offered through Western International Securities, Inc., Member FINRA & SIPC. Bennett Group Financial & Western International Securities, Inc. are separate and unaffiliated companies.
About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.
She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett.