If you’ve been following the news from Wall Street, you might assume that the economy is finally improving.  For example, in the July 11, 2013 issue of The Wall Street Journal’s Market Watch, Kate Gibson reported:

U.S. stocks leapt Thursday, with the S&P 500 up for a sixth day and setting a record finish, after Federal Reserve Chairman Ben Bernanke said the Fed would remain accommodative.

Whoopee Wall Street!

I.          Unemployment And Underemployment Are Growing

However, there are threatening clouds overshadowing the current economy.  One of them is the combination of growing unemployment and underemployment.  Indeed, in the very same Market Watch article Ms. Gibson reported:

Labor Department figures released Thursday showed first-time jobless claims rising last week by 16,000 to a two-month high of 360,000.

Moreover, in the May 3, 2013 issue of Market Watch Rex Nutting reported that although there were more jobs created, there were fewer hours worked:

The April employment report exceeded expectations, with 165,000 jobs created and a welcome drop in the unemployment rate to 7.5%.  But there was a dark side to the report:  Total hours worked fell sharply, and the total amount of money earned by U.S. workers actually declined from the month before.  “Aggregate weekly hours” is an obscure series of data in the jobs report, but it’s vital to understanding how strong the economy is performing. As the name implies, it measures the total number of hours worked, which is what matters for sizing up overall growth in the economy.

In fact, the reduction in hours worked translates into what is economically equivalent to a loss of 500,000 jobs.  As Mr. Nutting pointed out:

In April, companies hired 165,000 more workers, but they cut everyone’s hours (on average) by 12 minutes. That doesn’t sound like much of a decline, but spread out over the 135 million-strong work force, the decline in hours worked is the equivalent of firing more than 500,000 workers while keeping hours steady.  The 0.4% decline in hours worked in April means the economy isn’t quite as strong as you’d think on first glance.  For instance, some analysts applauded the 29,000 gain in retail-sector jobs in April as a sign that consumer spending is holding up well in the face of the fiscal drag caused by the tax hikes and government spending cuts.  But aggregate weekly hours worked in retail plunged by 0.7% in April, which is the equivalent of cutting 11,000 jobs. Suddenly, the report doesn’t look so rosy.

Why are we seeing a reduction in the number of hours worked?  There are undoubtedly many reasons, but one stands out as a particular offender:  Obamacare.  According to the University of California at Berkeley Labor Center’s February 2013 report:

The Affordable Care Act (ACA) requires employers to provide coverage or pay a penalty based on the number of employees working 30 or more hours per week.

The report concluded that:

The 2.3 million workers identified as at greatest risk for work hour reduction represent 1.8 percent of the United States workforce.

All of this cheery news comports with what I am seeing with many of my bankruptcy clients.  While they might still have jobs, their hours are being cut.  And they are having great difficulty finding full-time jobs.

II.        The Housing Market Improvement Is Artificial

Another alleged bright spot in the economy is an uptick in the housing market.

We have been told that the housing market is heating up, a sure sign that the economy is improving.  After all, if people are buying houses consumer confidence must be on the upswing.  For example, Ilyce Glink and Samuel J. Tamkin stated in the June 28, 2013 issue of the Los Angeles Times:

There’s no question that the real estate market is healthier than it has been in years, but the headlines aren’t quite giving consumers the whole story.  While existing home sales, new construction sales and home prices are trending up, they are still below their prerecession peaks, noted Amy Crews Cutts, senior vice president and chief economist for Equifax.

Is that the whole story?  Not according to Nathaniel Popper in the June 3, 2013 issue of the Deal Book section of The New York Times:

The last time the housing market was this hot in Phoenix and Las Vegas, the buyers pushing up prices were mostly small time.   Nowadays, they are big time — Wall Street big.  Large investment firms have spent billions of dollars over the last year buying homes in some of the nation’s most depressed markets.  The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out.  Some are already wondering if prices will slump anew if the big money stops flowing.  “The growth is being propelled by institutional money,” said Suzanne Mistretta, an analyst at Fitch Ratings.  “The question is how much the change in prices really reflects market demand, rather than one-off market shifts that may not be around in a couple years.”  Wall Street played a central role in the last housing boom by supplying easy — and, in retrospect, risky — mortgage financing.  Now, investment companies like the Blackstone Group have swooped in, buying thousands of houses in the same areas where the financial crisis hit hardest.  Blackstone, which helped define a period of Wall Street hyperwealth, has bought some 26,000 homes in nine states.  Colony Capital, a Los Angeles-based investment firm, is spending $250 million each month and already owns 10,000 properties.  With little fanfare, these and other financial companies have become significant landlords on Main Street.  Most of the firms are renting out the homes, with the possibility of unloading them at a profit when prices rise far enough.   While these investors have not touched many healthy real estate markets, they are among the biggest buyers in struggling areas of the country where housing prices have been increasing the fastest.  Those gains, in turn, have been at the leading edge of rising home prices nationwide. . . .  The idea of investors’ buying homes and renting them out is nothing new. But in the past, landlords were almost always local.  Now big investors are using agents like Mr. Cusumano to stake a claim to entire neighborhoods.  In a sign of the potential peril ahead, some of the investment firms have recently taken the first steps to cash out.

Thus, those who look to the housing market as an indication of economic improvement are looking at a very small slice of the population’s financial improvement.  The rest of the population is seeing its fortunes shrink.

III.       Obamanomics:  The Rich Get Richer And The Poor Get Poorer

President Barack Obama decried the economic policies of his predecessors.  He asserted that his policies would ensure that instead of the rich getting richer, the middle class would grow.

How are his policies working for you?

Here’s what the April 24, 2013 issue of Investor’s Business Daily reported:

When President Obama first ran in 2008, he claimed his economic policies would “foster economic growth from the bottom up and not just from the top down.”  He said he’d put in place “an immediate rescue plan for the middle class” and would end the “tired, worn-out, trickle-down ideologies we’ve been seeing for so many years.”  Obama got all he wanted in his first two years in the White House, when Democrats had solid control of Congress — a massive stimulus, auto industry bailouts, temporary middle class tax cuts, vast new regulations on businesses and ObamaCare.  But his policies produced the exact opposite of what he’d promised.  The latest evidence is a Pew Research Center report out this week, which shows that only the rich have made gains under Obama, while everyone else has fallen further behind.  Using Census data on net worth, the Pew report found that from 2009 to 2011, the richest 7% of Americans saw their net worth climb an average $697,651 — equal to a 28% gain.  The rest of the country saw their net worth drop an average $6,079 — equal to a 4% loss.  As a result, far from making the country more equal, Obama’s policies have produced a greater concentration of wealth, with the share of wealth held by the top 7% rising to 63% in 2011, up from 56% in 2009, Pew found.

So where do things really stand?  The unemployed and underemployed are falling into penury, housing is becoming the big boys’ playground, the rich are getting richer, and the poor are getting poorer.  What can you do?

If you’re falling behind each month and are seeing the growing debt contributing to your financial woes, why not get rid of it altogether?  Avail yourself of the constitutionally sanctioned way of becoming debt-free and file for bankruptcy protection.  But don’t go it alone because the cards may be stacked against you.  Instead, use a high quality bankruptcy attorney.