High unemployment hurts everyone.

Posted on November 17th, 2009 by admin

The jobless rate reached 10.2 percent as October ended, marking the highest level of unemployment in nearly three decades. Percentages are just statistics; the reality is there are 15.7 million men and women who want to work but cannot find a job. Add to this the underemployed, those who are working part-time even though they would like full-time work and those who are off the unemployment roles and simply given up looking for a job, and the numbers nearly double. This impacts seniors, particularly pre-boomers, in several ways.

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A jobless recovery means a slow recovery. Consumer spending, which accounts for more than two-thirds of the nation’s Gross Domestic Product (GDP), will not be the driving force it has been following most other recessions. The unemployed and underemployed coupled with a like number of people who fear losing their jobs might account for upwards of half the total available workforce. The result is less consumer spending overall.

Less spending is contagious. Even those who have not been personally impacted by the country’s financial woes and believe they are relatively safe when it comes to job security are not spending as they have in the past. Direct payroll deposits keep cash in the bank while rising credit card rates tend to affect short-term purchases, making the buying of everyday items a less than everyday occurrence. According to a recent Gallup poll, daily spending among baby boomers, who account for 36 percent of adults, is down nearly 35 percent from last year.

The mostly fixed income pre-boomers (those born between 1930 and 1945) usually spend less than younger consumers. However, the economic downturn has caused their daily spending to drop by about 45 percent. So while boomers are nervous about spending, pre-boomers are simply scared. There are sound reasons for this concern: savings have suffered, homes are worth less, health care benefits are scheduled to be cut and inflation looms on the horizon.

The cutting-edge boomers, those 60+ and nearing retirement age, are not likely to return to their spending ways unless the economy shows vitality on all fronts. Pre-boomers won’t be spending until the recovery is proved viable and they see their retirement savings return to, or near, previous levels.

This leaves the trailing boomers, generation X and generation Y consumers to do the spending; however, these are the same demographic groups that will be required to purchase health insurance in order to pay for those who can’t afford insurance. In addition, faced with higher taxes – energy taxes, a national sales tax as well as increased state and local taxes — will these groups be willing to step up and start buying? Or, have we run out of the kinds of consumers this country has depended upon to whip out their credit cards and cry, “Charge?”