The October unemployment report showed a record low labor participation rate of 62.8%, graphed below. Many dismiss these record low labor participation rates by claiming more people are retiring and young people are just in school. Is this true or is something more sinister going on?
Wells Fargo has released a new survey on retirement. Surprise, surprise, most of us are royally screwed. CNN calculated it out and realized most have only $190 a month to live on in retirement.
It appears especially the middle aged, you know those ones who desperately need a job and are denied, are raiding their 401ks. From Fidelity Investments Q2 2010 statistics on 401k, retirement accounts:
the percentage of participants either initiating a loan or a hardship withdrawal increased. Loans initiated over the past 12 months grew to 11% of total active participants from about 9% one year prior. The portion of participants with loans outstanding also increased two full percentage points in the second quarter to 22%. The average initial loan amount as of the end of the second quarter was $8,650 with an average loan duration of three and half years.
Frankly I thought this number would be much higher, for we have horrific stories of people posting online their suicide notes. Maybe it is because those who are going homeless already blew past any retirement savings. Regardless, a sign of the times and this is only people who have retirement savings to tap into.
Business Week has an interesting article on baby boomers.
While we have already questioned the statistics on the jump in savings rate, the story shows just how focused policy makers are on Americans being consumers instead of producers.
Some statistics claimed in the article:
$400 Billion is the amount of spending lost
GDP growth until now has been at least 3.2% yearly since 1965
Future projected GDP growth is at 2.4% (see post overviewing skew in GDP)
78% of GDP growth in the decade from 1995-2005 is attributed to boomers
Woah, new article from Business Week is pointing to regulators allowing:
The folks who brought you the mortgage mess and the ensuing hedge fund blowups, busted buyouts, and credit market gridlock have another bold idea: buying up and running troubled corporate pension plans. And despite the subprime fiasco, some regulators may soon embrace Wall Street's latest scheme.
In preparation for that moment, the world's biggest big investment banks, insurers, hedge funds, and private equity shops have been quietly laying the groundwork for such deals over the past year. They would be a big prize for Wall Street. The $2.3 trillion pension honey pot has $500 billion in "frozen plans" that are closed to new employees and whose benefits are capped
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