The Barista Economy

Falling unemployment numbers allow politicians to take credit for a recovery that has truly eluded the lower and middle classes. For anyone in the upper reaches of our economy, life is good. More wealth is concentrated at the top, new oil finds (through fracking) is enriching those who drill and own the resources, new earnings gains have almost entirely gone to those who are at the crest of the food chain, as manufacturing returns to the U.S. those who own the automated machinery get the money that once went to skilled labor, and the benefits of cost-cutting and automation have pushed the stock market to new (unsustainable) heights.

For everyone else, it’s about rising college tuition costs without off-setting financial aid, chronic long-term unemployment, fewer benefits by reason of term-limited “temporary contract” work, part-time jobs and the not-so-subtle threat that if you think you are overworked and underpaid, there are dozens of applicants who would kill to take your place. Too many Americans have just stopped looking for jobs. As we examine the new jobs that have appeared, the lucky ones are finding work in generating climate-killing fossil fuels. Healthcare, construction (hard to export), hospitality and food services are hiring too, but most of those jobs are most certainly in the lower-paying reaches of our economy. But for entry-level workers, even many with advanced degrees, they are forced to accept jobs with low pay and little or no opportunity for advancement. The new barista economy.

Average Americans also see through the master illusionists’ “lying with statistics.” They may buy into simplistic and unworkable sloganistic solutions from politicians left and right, but Americans actually do know what the macro-issue really is: under/unemployment. There are corollary fears reflected here, almost all directly relating to the rather obvious trend of a declining standard of living for the vast majority of Americans. It may stem from a more general malaise in the Western world as it yields its economic holdings to the rising stars of the developing world, but whatever the cause, Americans know it is real.

“Unemployment has retaken its place in Americans' minds as the country's biggest problem, according to a new Gallup poll published [on February 17^th]… 23 percent now consider unemployment the greatest challenge facing the nation, while only 16 percent said the same in January.

“More people named joblessness as the nation's top problem than ‘government and politicians,’ which had been the most popular answer among survey respondents since the government shutdown last year… Before the shutdown, jobs and the economy had topped the list… The poll was conducted between Feb. 6-9. On Feb. 6, Senate Democrats mounted another unsuccessful attempt to extend long-term unemployment benefits, which lapsed for more than 1.7 million Americans at the end of December.

“Only 63 percent of working-age Americans have a job or are actively looking for one -- the lowest share of the population participating in the labor force since 1978. (The population of working-age Americans here includes anyone over the age of 16, including those who have retired and students)… And while the jobless rate fell last month, the drop was due in large part to the long-term unemployed giving up on looking for work.” Huffington Post, February 18^th. So Americans just plain do not believe that the Bureau of Labor Statistics numbers are particularly relevant. They are facing the BIG RE-SET.

As droughts slam some of our most productive agricultural lands, as rising demand for higher-quality foodstuffs places greater demand on the food that is produced, Americans are going to face steadily-rising prices of their basics. And has the pent-up demand for cars and homes dissipates (as people slake that thirst), expect prices and demand to drop. Real “average” buying power has declined every year for well over a decade; discretionary income has severely dissipated, and for teens who once held part-time and summer jobs, the availability of some “spending cash” has crashed and burned. The law of unintended consequences is kicking in. Like the impact of massive student debt.

“The staggering amount of outstanding student debt — nearly $1 trillion owed – is beginning to impede the U.S. economy as a whole, a new report from the New York Federal Reserve suggests, chiefly by robbing the housing market of its richest crop of new buyers: young college graduates.

“The statistics in the report are dismaying in themselves. With the number of borrowers approaching 40 million nationally, including more than 40 percent of 25-year-olds, the average balance on their loans has risen to $25,000. About 6.7 million of all student borrowers, or 17 percent, are delinquent on their payments three months or more.

“For the average homeowner, the worst news is that these overleveraged and defaulting young borrowers no longer qualify for other kinds of loans — particularly home loans. In 2005, nearly nine percent of 25- to 30-year-olds with student debt were granted a mortgage. By late last year, that percentage, as an annual rate, was down to just above four percent.

“The most precipitous drop was among those who owe $100,000 or more. New mortgages among these more deeply indebted borrowers have declined 10 percentage points, from above 16 percent in 2005 to a little more than 6 percent today.” CNBC.com, March 4, 2013. With mid-term elections coming up, nothing can be more pertinent than the most basic political maximum of them all: It’s the economy, stupid!

I’m Peter Dekom, and unless these polarizing long-term trends are reversed, we may be at that inflection point where the viability of the United States of America as a continuing and unified global power may yield to an actual fracture into several component geographical states.