Hidden Figures: Consumer debt overrides glowing employment figures | Opinion

·4 min read

July's Employment Situation Data were released by the Bureau of Labor Statistics August 5, 2022. The employment numbers increased by 528,000. This was twice the projection by economists. The unemployment rate dropped to 3.5% and wages increased by 0.5%.

So why am I not leaping for joy? It's what lies beneath the figures that concern me.

Inflation is rising at a faster pace than last month's miniscule 0.5% increase in average hourly earnings. This leaves consumers with a lot to be concerned about going forward? These concerns are three types of consumer debt: Mortgage debt, Student loan debt, and Car loan debt.

Mortgage debt is still the largest debt looming over the head of consumers. It is common to hear a lot of people say they own their home. The truth of the matter is most people do not own their homes outright. This includes senior citizens heading into retirement and many who are already in retirement. It used to be that mortgage loans lasted 15 to 30 years but today some mortgages can extend out to 40 years or longer. Instead of leaving property or money to their children or grandchildren, upon death, what is being left by mortgage payers are unpaid loans or the task of selling the home and collecting whatever equity might be in the home if any. The true costs of the homes are nowhere close to the original quoted price on the initial purchasing date because of high interest rates and long-term payments. It may appear that the prices of homes are going up but the truth of the matter is that adjusted for inflation most homes are just keeping pace with inflation. There are various online inflation calculators where consumers can crunch the numbers for themselves.

Student loan debt is the second largest debt that people are buried under. With colleges and universities gearing up to open this fall their finance offices are waiting with open arms. As the rate of college graduates has increased in the country so has student loan debt. I am certain that everyone in today’s society can agree that a college education is an absolute necessity. Statistical data, from the Bureau of Labor statistics, proves this to be a definitive reality. The unemployment rate for someone with a college degree (bachelor's, master's, professional, and doctoral degrees combined) is approximately 2% as of last month. With these four different levels of education embedded together in the 2% unemployment data in the employment situation within this month’s report it is easy to see how small the level of unemployment will be with each higher degree level. The unemployment rate for someone with a high school diploma alone is 3.6%. For high school dropouts the unemployment rate is 5.9%. Another difference is the pay. College graduates tend to be salaried employees which means they do not get paid by the hour and they get paid a lot more regardless of how few hours they may work or how many more hours they may work. High School graduates tend to receive hourly earnings unless self-employed. For college graduates the debt is worth it in the long run. Some finance experts even refer to it as an investment which I am in agreement with but the bottom line is it is still debt that must be paid over a period of time after graduation. The length of time varies.

Car loan debt has also increased. Car loans used to extend no more than 3 to 5 years now they can extend as far out as eight years or longer. Some people end up paying more for their cars than the original sticker price due to drawn out monthly payments and higher interest rates. In Business we refer to it as being under water. Even with more people teleworking before and after the Pandemic, personal transportation is an absolute necessity. As a matter of fact, the Bureau of Labor Statistics pointed out in its Aug. 5 report that last month only 7.1% of workers reported teleworking due to the Pandemic. This means that an overwhelming majority of workers are driving to work. Aside from work and leisure car transportation, cars are needed for other activities up to and including transporting children back and forth to sports events, dentist appointments, doctor’s appointments, etc.

In summation, on the surface the employment situation report released by the Bureau of Labor Statistics for the month of July looks good on the surface. It's what lies beneath that gives me cause for concern. The household outflow of money continues to exceed the inflow of money due to consumer debt. In my opinion, the debt that most Americans are stuck with is not eradicated with a positive employment situation report. Nor are they mutually exclusive.

Dr. Kathleen C. Jacobs is professor emerita of business management at Wesley College and a former state president of the American Association of University Women of Delaware.

This article originally appeared on Delaware News Journal: Hidden Figures: Consumer debt overrides glowing employment figures