For lower income folks the landing is already hard. Chief investment strategist at Charles Schwab Liz Ann Sonders posted on X (and reported by Almost Daily Grant’s) that the tally of domestic temporary help employees slipped to a three-plus-year low of 2.748 million down from 3.181 million as of March 2022. The 14% comes in 4th in the category’s downward drops percentage-wise since 1990; to the early 2000s, the 2008 financial crash and the Covid debacle, each coinciding with a recession.
Outplacement firm Challenger, Gray & Christmas reports nationwide layoffs totaled 84,638 last month, the largest February sum since 2009. The Federal Reserve Bank of New York’s Survey of Consumer Expectations for February finds that respondents give themselves a 14.5% chance of being let go from their jobs on average, the highest ratio since spring 2021 and up substantially from the 11.8% figure logged in January.
Meanwhile, Sam Stovall at CFA, cites the American Association of Individual Investors’ survey showing an “unusually high” level of bullishness and the CNN Fear/Greed Indicator that recently registered “extreme greed.”
So while working folks are dodging layoffs, to make ends meet they are taking emergency withdrawals from their 401ks. The Wall Street Journal reports Amercians are using their 401k’s as cash machines.
Anne Tergesen writes, “A record share of 401(k) account holders took early withdrawals from their accounts last year for financial emergencies, according to internal data from Vanguard Group. Overall, 3.6% of its plan participants did so last year, up from 2.8% in 2022 and a prepandemic average of about 2%.”
The number of emergency distributions hit record highs both of the last two years, according to Vanguard, which administers 401(k)-type accounts for nearly five million people and published the data ahead of an annual report scheduled for June, reports the WSJ.
Contrary to the Challenger, Gray & Christmas and Liz Ann Sonders data, Tergesen writes “hiring has been strong and workers’ earnings keep rising, the cost of groceries, child care and car insurance keeps climbing. More people are carrying heftier balances on their credit cards.” And thus, the need to tap into the retirement plan despite being bullish on stocks.
But cookie jar must be raided when a foreclosure notice is received. “Nearly 40% of those who took a hardship distribution last year did so to avoid foreclosure, compared with 36% in 2022,” writes Tergesen. “In 2023, more than 75% of hardship distributions totaled $5,000 or less, according to Vanguard.”
As is the case with every inflation in history, those with lower incomes and fewer assets suffer the most. As economist Murray Rothbard wrote “monetary inflation is a method by which the government, its controlled banking system, and favored political groups are able to partially expropriate the wealth of other groups in society.”
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