Saturday, March 17, 2012

Over 20% of young adults moving back in with parents

The OC Register published an article that shows a growing percentage of young adults are moving back in with their parents, in large part for financial reasons.

It’s growing, for sure. Pew’s analysis of Census data found shows that 21.6% of Americans ages 25 to 34 living in multi-generational households in 2010 vs 15.8% in 2000 and 11% in 1980.

The percentage has doubled since 1980. I graduated from college at the end of the nasty stagflation recession in the early 1980s and had to spend nearly a year with my parents before finding my first "real" job. Moving back in had everything to do with not being able to find a self supporting job. This is another data point that flies in the face of the return of the boom times.

I see a lot of anecdotal evidence all around me. Young adults, sometimes with their own spouses and/or kids, have moved back in with their parents in two of the houses on my block. This to the chagrin of their parents. One of my wife's friends, in their late 30s, have moved in with their parents twice in the last four years due to job losses. I hear similar stories from colleagues at work.

Moving back in with parents is not cooler than you think, as the OC Register suggests. It is simply a matter of necessity for the less fortunate proles.

Thursday, March 15, 2012

SNAP participation hits 15%

The federal food stamp program, known as SNAP, has still growing participation rates. As of December, 2011, there were over 46.5 million people on SNAP. To qualify for SNAP, you need to have poverty level income and less than $2,000 in assets. Looking at the trends after the end of previous recessions, the participation rates began falling. After the 2001 recession, the rate peaked three years after the recession, then began falling. We are almost four full years away from the end of the last recession and rates are still climbing. The rate might be topping out here but the evidence is unclear.

Tuesday, March 13, 2012

California UI Trust Fund still deeply insolvent

The news from the recent US bank stress tests was stellar, and the stock market is booming. But how is the real economy doing? I keep looking for signs of the boom on the ground.

One of the statistics I started tracking during the Credit Bust of 2008 was the California Unemployment Insurance Trust Fund. It first went insolvent in January, 2009 and now has a balance of -$9.8 billion. The state of California has borrowed almost ten billion from the federal government in order to continue paying unemployment benefits. There is always a big improvement in May when taxes are collected, then it continues grinding deeper in the hole. The graph through December, 2011 sure doesn't look like a boom is under way or that the fund is reversing the trend.

California employers are now paying a higher federal unemployment insurance tax rate because of the state's poor performance and inability to pay back the federal loan. Under the original loan terms, the state was to begin paying interest on the loan in 2011, but that has been deferred. This is a ten billion off balance sheet liability for the state.

Friday, March 2, 2012

Italian bond crisis passes

Thanks to the ECB long term refinancing operation (LTRO1 and LTRO2), and Italy meeting its fiscal goals for the quarter, the interest rates on the 10 year bond have come down well out of the crisis levels of 2011.
The close today below 5% was the best since last August. This is a big relief because there may not have been a non-market plan for Italy that would have worked. Attention remains on Greece, Spain, and Portugal, with particular attention to the Greece bond payment due March 20.

The LTRO was not really a solution because the banks have to gigantic balloon payments to make 3 years from now, but that's 3 years from now.