Reuters Money

Surveys say: Retirees are getting very nervous

Reference librarians are nothing if not precise, and Kevin Davey plotted his exit from the Chicago Public Library system with all the exactitude of a veteran fact-finder. His last day was Sept. 30 — just 48 hours after his 55th birthday and first day of retirement eligibility.

With his wife still working and the couple’s finances under control, Davey figures that he has the ideal plan in place. All that remains is to land a part-time job with another library to put the icing on the cake. But after submitting close to 20 resumes, Davey hasn’t fielded a single interview.

“I’ve looked for work in bad economies before, but this seems to be more difficult now than it’s been in the past,” he says. “What’s baffling me is that my resume hasn’t floated to the top with all the experience I have.”

If Davey is starting to feel anxious, then no wonder other retirees report financial jitters of historic proportions. The latest Well-Being Index from the Principal Financial Group reveals that 36 percent of retirees — up 15 percentage points from last year — are pessimistic regarding the economic outlook for the rest of 2011.

How do you feel about the economic outlook for the rest of 2011?

• Optimistic
• Pessimistic

Gen Y out of work: What is corporate America doing about it?

Highly educated, sometimes entitled and incredibly humbled by the current labor market, Generation Y is hungry for work. But do employers understand this enormous and grossly underemployed demographic?

Nearly eighty million strong, Gen Y is loosely defined as those born between 1980 and 1994 (or 2005 depending on who you talk to). Raised in a kid-centric time, many continue to be coddled by helicopter parents not willing to wean their precious lot from the proverbial financial teat. As a result, Gen Y’s expectations of the workforce are vastly different from baby boomers and even the closely-related Generation X.

“When they get to the workplace, they have a sense of entitlement, a need for validation, difficulty in really discerning what to do because their whole lives were managed,” says Christine Hassler, a Gen Y career expert and consultant to American Express on Millennials. “They have challenges with making decisions and have expectations of work-life balance. They want their opinion to matter and [want to work] for a company that is really making a difference.”

Major employers are struggling to understand this often fickle demographic, choosing instead to focus on candidates familiar with the corporate structure. And in this fragile economy, a new employee who can hit the ground running is an asset. ”I’m seeing a lot of corporations saying they know they need to engage Gen Y and hire young employers because it costs less, but they don’t want to take the risk of hiring someone without work experience,” says Hassler.

Corporate America is also waiting for this demographic to conform to the old playbook, something completely foreign to Generation Y, says Garrison Wynn, CEO of career management website Wynn Solutions and author of “The Real Truth About Success.” They were told they could have everything they wanted and could be whatever they wanted to be. ”They’ve come to collect on that,” Wynn says. “That’s what they expect. So, when they get in a job interview and it looks like the path isn’t going to be good enough or fast enough, then they’re not interested.”

Volatility in global markets, weak domestic growth and persistent economic concerns in Europe are also complicating an organization’s willingness to expand, despite high corporate profits. “The pain of downsizing and the destruction of the organization is so difficult that companies are playing it safe,” says Jackie Greaner, North America practice leader, talent management and organization alignment for Towers Watson. “It’s hard in this type of market, where it goes up and down to such a degree; it leaves everyone feeling less than confident about the state of the economy.”

Spending less could make recession a “self-fulfilling prophecy”: Analysts

Mark and Kathy Swezy of Englewood, Colorado embody what many Americans would call a rock-solid work ethic. Mark is a full-time purchasing manager at JoaQuin Manufacturing, while Kathy splits her time between her own graphic design business and a job at Nosh Nest, a high-end cookware and food shop in downtown Denver, Colorado.

Yet to hear Kathy Swezy tell it, the last two months have meant belt tightening on top of more belt tightening. “Over the last 60 days it’s been a little bit better, because I’m starting to get more graphic design work — but I really had to cut my rates, too,” she says. “So I’ve been buying school clothes at thrift stores, I’m using outdated software,and basically we don’t go out to dinner much at all.”

The Swezys reflect in their behavior what analysts are seeing across a large swath of the American economy. According to Bankrate.com’s September Financial Security Index, 40 percent of Americans have reduced their spending in the past 60 days, a condition that Bankrate senior financial analyst Greg McBride believes could pave the way for another recession.

“That sort of cutback of spending, if sustained for any length of time, would make a recession a self-fulfilling prophecy,” McBride says. “August was in many ways a perfect storm: We had a barrage of poor economic data, a downgrade to the U.S. credit rating, the fiasco over the debt ceiling and a stock market correction. And Europe has been an ongoing issue as well.”

All of that has led to deteriorating financial security among American consumers, who only make things worse when they spend less. “Seventy percent of economic output comes from consumer spending, and any sort of cutback can ripple through the economy very quickly,” McBride says.

Just in case you think McBride’s fishing for headlines, his words are more or less echoed by Clifford L. Caplan, founder and president of Neponset Valley Financial Partners in Norwood, Massachusetts. “With the lukewarm domestic economy, high unemployment and continued problems in housing, few — including myself — see a silver lining to the current malaise,” he says. “Obviously if this reduction in consumer spending continues, the U.S. economy will slide back into recession.”

As for holding out on hope, “Consumers are now shopping in the present tense,” says Jean Chatzky, a New York-based financial expert and author of “Money 911.” “What this environment has taught consumers — for better or for worse, and from my perspective it’s for worse — is that there is no good way to plan for the long term. So when the Dow has a good day or week, they open their wallets. And when there’s more bad economic news from Greece or France or Italy, they close them tight.”

Double-dip recession porridge: 3 bears dish it out

Now that fears of a double-dip recession are on everyone’s mind, the bears are on the prowl and really cranky.

What’s the best way to tame our fears and become confident long-term investors? Let’s listen to what some of my favorite bears have to say and then take a look at the big picture.

The most ominous threats are that of a European bank failure or double-dip recession that would slam both the U.S. and Eurozone. One of the most vocal ursines — Nouriel Roubini, professor of economics at New York University — starts out his jeremiad by asking the question “Is Capitalism Doomed?”

“The massive volatility and sharp equity-price correction hitting global financial markets signal that the most advanced economies are on the brink of a double-dip recession,” Roubini writes.

Bemoaning the Euro debt crisis, America’s fiscal crisis and even the Japanese earthquake and tsunami, Roubini is not sanguine the current system can handle these calamities. Consumers are gloomy and the U.S. housing market is still in the dumps.

“To enable market-oriented economies to operate as they should and can, we need to return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon laissez-faire and voodoo economics and the continental European model of deficit-driven welfare states.”

Roubini’s route to this radical shift? More infrastructure spending, progressive taxation, reduction of household debt burden and “breaking up too-big-too-fail banks and oligopolistic trusts.” Paging the U.S. Treasury Department, Congress, Federal Reserve and Bank of America.

Is the man-cession finally over?

Good news, lads: things are finally looking up on the job front.

After taking a beating in the labor market during the financial crisis  — 5.2 million men saw their jobs evaporate between November 2007 and December 2009, compared to only 1.9 million for women — the tide is finally turning.

A new report by Challenger, Gray & Christmas shows that 1.7 million men have returned to the ranks of the employed since  the beginning of last year, with 686,000 men finding work in the last 12 months alone.

“Men were hit disproportionately during the recession,” says John Challenger, chief executive officer.  Indeed, some of the most gripping photos of the financial crisis showed hordes of men (and a handful of women) vacating their Manhattan offices following the collapse of Lehman Brothers in 2008 (see photo, left). “Now more of them are heading back to work, and I think in the next year we’ll see that continue.”

Mike Werch, marketing associate for job search site Indeed.com, crunched the numbers and found that male-dominated industries have seen the biggest jump in job postings in recent years.

Take transportation, for instance, which  saw a 147 percent surge in job postings from December 2009 to December 2010, closely followed by manufacturing, which jumped by 90 percent in the same time period.

But the so-called “Man-covery“, as clever news outlets like to dub it, hasn’t been so kind to women. Employment among women has only grown by 365,000 since January 2010, with the number of employed women actually dropping by 85,000 in the last 12 months.

Money spats rise as recession worries linger

If money arguments with your spouse or partner seem to be cropping up more frequently lately, you’re not alone.

The percentage of people who report that discussions about household finances turn into arguments some or all of the time has risen to 61 percent from 45 percent over the last year, according to the latest Spending and Saving Tracker survey from American Express. Among young professionals under age 30, that number rises to 70 percent.

An improving housing market, moderating credit card defaults, a strong stock market and other economic green shoots suggest that household finances are on firmer footing than they were a year ago. That should pave the way for fewer money arguments, not more of them.

But with the recovery still wobbly many couples remain cautious about spending observes Leah Gerstner, vice-president at American Express, says the prolonged strain of pinching pennies and postponing discretionary purchases could be bringing money tensions to the surface.

“For many people the reality of the recession is setting in, just as gas and food prices are rising,” she says. “It’s taking some couples longer to rebuild their finances than they anticipated.” The fact that young professionals are still learning how to meld their individual financial lives harmoniously may help explain why they often bicker more than others, she adds.

Laurie Blazek, a financial adviser based in River Forest, Illinois, isn’t surprised by the survey results. Blazek, whose practice includes divorce mediation as well as traditional financial planning, says the financial pressures brought by the recession have taken a toll on many of her clients’ marriages.

“Money problems such as a job loss, falling home values or high credit card debt play a big role in the majority of divorce cases I handle,” says Blazek, whose own divorce 12 years ago was prompted, in part, by money issues. “A lot of people were living beyond their means, and when they lost a job they had no financial cushion to fall back on.” Even though many of these couples might have divorced regardless of the economic climate, she says, a tough economy may have brought things to a head sooner.

Housing bust squeezes renters

The housing bust horror flick is now giving way to a very unwelcome sequel: a big squeeze on the cost of renting.

The number of renters paying more than half of their income towards rent has hit record levels, according to a new study by the Joint Center for Housing Studies (JCHS) of Harvard University.

Rental affordability is a critical issue for seniors, who live on fixed incomes and already are coping with low yields on their savings, fast-rising healthcare expenses and stagnant Social Security benefits. Yet the struggle with affordability is found most often among low-income Americans; JCHS found that 75 percent of renters in the lowest quartile of income are spending more than half of their income on housing. JCHS also found that lower-middle class renters also are having trouble finding affordable rental housing.

For example, 33 percent of renters with annual income of $14,500 to $30,000 are facing “severe burdens” in finding affordable rent. And the problem is growing most rapidly among demographic groups traditionally less likely to have affordability problems, including younger households, married couples with children and renters with some college education.

“These are astounding numbers,” says Eric Belsky, managing director of JCHS. “If you are spending half of your income on housing, you have very little to spend on everything else.”

The problem stems from a mismatch of supply and demand of affordable rental housing in the wake of the housing crash. The recession pushed up vacancy rates, and depressed rents, property values and new multi-family unit construction. Meanwhile, the foreclosure crisis has sparked a substantial increase in the number of former owners who now need to rent — just at a moment when development of new affordable housing units has stalled:

The supply gap for very low-income renters (with incomes up to 50 percent of area medians) also increased. In 2003, 16.3 million of these households competed for 12.0 million affordable, available, and adequate units. In 2009, these renters numbered 18.0 million while the supply of units dipped to 11.6 million, widening the gap from 4.3 million to 6.4 million units.

Gen Y on the recession: lesson learned

Generation Y has long been derided for everything from being spoiled to self-involved, but the so-called “Me Generation” vow to get one thing right: they won’t let the next downturn catch them off guard.

A survey by TD Ameritrade found that members of Gen Y (broadly speaking, anyone born between 1979 and 1988) heeded the lessons of the financial crisis better than any other generation, despite being faced with dwindling Social Security, rising college costs and an anemic job market.

So are they delusional, or what?

“I think what this shows is they’re more flexible and adoptable,” offers Stuart Rubinstein, managing director of investment products at TD Ameritrade. “And the fact that they have fewer responsibilities means they can react faster, too. It’s a bit different when you’re 50 years old, you have a mortgage and you’re staring down retirement.”

It helps that their expectations are more in line with reality, too. Gen Ys don’t have any romantic notions of working for the same employer for 30 or 40 years the way their parents did, Rubinstein says. And they don’t expect a giant pension check at the end of their careers, either.

“They know that’s not going to happen, and that’s why we’re seeing them take control and do something about it,” says Rubinstein.

Among the survey’s findings:

Young or old: Who’s suffering more in this economy?

The numbers are dismal: the U.S. Census Bureau reports that the poverty rate rose sharply last year to 14.3 percent, the highest since 1994. Forty-four million Americans were below the official poverty line, and one out of every five children were considered poor.

If there’s a silver lining in the annual poverty report, it seems to be this: Seniors were relatively unscathed by the harsh recession that started in the fall of 2008. The poverty rate for Americans over 65 fell from 9.7 percent to 8.9 percent. And, while income was flat or down for every other age group, seniors’ income rose a whopping 5.8 percent.

At first glance, the numbers seem to point to a generational divide, with older Americans in an economic lifeboat at a time when the ship is going down.

Unfortunately, the lifeboat is leaky, too. Social Security has played a critical role lifting millions of seniors out of poverty, but the big gains last year are due to a series of one-time events that won’t be repeated. In fact, the long-term economic prospects for older Americans are no better than those facing younger age groups.

Social Security is one of the few retirement benefits that features built-in inflation protection. In 1975, Congress added an automatic annual cost-of-living adjustment (COLA) to Social Security, which is pegged to the third quarter Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). And in the third quarter of 2008 — just before the economy crashed — the CPI-W spiked temporarily, the result of a big increase in energy prices.

The result was a whopping 5.8 percent boost in Social Security benefits for 2009 — a raise that was especially generous considering the near-absence of inflation in the post-crash economy. Social Security payments can’t fall under federal law, so payments have stayed at that level throughout 2010.

Seniors on Social Security or disability benefits also received a one-time payment of $250 under the 2009 stimulus — a payment that was especially meaning for older couples near the poverty threshold.

Investing in the under-the-radar recovery

Two main theories about the global economy dominate these days: 1) We’re headed for a double-dip recession, and 2) things are getting better at a thick, syrupy pace.

I subscribe to the slow-as-molasses rebound view. While I don’t rule out another European debt crisis, the worsening of the U.S. home market and unemployment or any other calamity, things are slowly getting better. It’s time to start investing in stocks again.

When there’s so much conflicting news in the business headlines, I tend to listen to influential institutional investors like Dan Farley, who manages more than $190 billion for Boston-based State Street Global Investors.

I heard Farley run through some relatively optimistic numbers last week at the Morningstar ETF conference in Chicago. Although Farley admits there are still a bunch of wild cards in the economy, he’s somewhat upbeat.

“Right now, we’re in a stable but shallow recovery mode,” Farley said. “Corporate cash is at a record high of 50 years, and equities have room to grow.”

“Banks are no longer tightening loan requirements and starting to lend; companies are starting to borrow. Hiring plans, inflation and durable goods orders are likely to pick up until (factory) capacity utilization picks up.”

Why look for a silver lining when the U.S. is staring at a $13 trillion national debt, some European countries are still in trouble and the jobs picture remains dark? Farley uses words like “anemic” to describe the nascent recovery and he’s certainly not sanguine about employment, which he doesn’t think will fully rebound until 2015.