The excessive government debt is counteracting the good job consumers of doing in reducing household debt.
A stark article in the Wall Street Journal today about males without a college degree struggling in the job market more than any other group.
Here are the top financial stories of the day:
1) Wall Street edges up in choppy day, swayed by Europe-From Reuters
Stocks closed a volatile, lightly traded session slightly higher on Monday, with sentiment continuing to shift with the latest headline from Europe.
Wall Street spent most of the session lower before rebounding after Juergen Stark, a member of the European Central Bank's Executive Board, said the region's debt crisis might be overcome in "one or two years at the latest."
In a signal that investors remain cautious, the strongest performers were healthcare and telecommunications stocks, both considered defensive sectors.
The S&P Health Care sector rose 1.2 percent, with Pfizer Inc gaining 2.1 percent to $20.07.
Volatility in the stock market has become more closely correlated with shifts in European bond markets, another sign of Europe's influence on U.S. equities.
"Given the overhang that Europe has been having on equities, stocks are going to be subject to intraday moves based on innuendo or conjecture as much as fact," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
"Any news that's viewed positively is going to move the market, but I don't trust the move. We could just as easily fall back down."
The Dow Jones industrial average was up 85.22 points, or 0.71 percent, at 12,068.46. The Standard & Poor's 500 Index was up 7.89 points, or 0.63 percent, at 1,261.12. The Nasdaq Composite Index was up 9.10 points, or 0.34 percent, at 2,695.25.
The latest source of anxiety is Italy, where Prime Minister Silvio Berlusconi defied pressure to resign, keeping markets on edge before a key parliamentary vote on budget reforms.
Volume was light, with about 6.3 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 8.47 billion.
Italian government bond yields rose to their highest since 1997 as political turmoil in Rome threatened to drag the euro zone's third-largest economy deeper into the region's debt crisis.
"The big risk is that the Italian government doesn't accept the austerity plan, which is Greece but on a scale a thousand times larger than Greece," said Jeff Buetow, chief investment officer at Innealta Capital in Austin, Texas.
Buetow, who helps oversee about $3 billion in assets under management, said his firm had reduced equity exposure in recent weeks because of European uncertainties. "There's a lot more downside risk than upside risk, and a lot of risk in general," he said.
Adding to the uncertainty, Greece's outgoing Socialist prime minister and conservative opposition leader raced to forge a coalition government and implement a new bailout program.
Equities have been very sensitive to headlines from Europe, especially with a light U.S. economic calendar this week and as earnings season winds down.
The CBOE Volatility Index VIX fell 0.9 percent after rising earlier in the session. Fresh worries about sovereign debt default have boosted the stock market's volatility.
Priceline.com Inc sank 4.7 percent to $485.15 in extended trading after the company reported results below expectations.
Consumer electronics chain Best Buy Co Inc lost 3.1 percent to $26.46 after the consumer electronics chain said it was buying British partner Carphone Warehouse Group Plc for $1.3 billion and scrapping plans for a chain of European megastores.
On the NYSE, about 52 percent of stocks closed in positive territory, while on the Nasdaq, about 14 fell for every 11 that rose.
2) Federal borrowing mounts while household debt shrinks-From USA Today
The sharp rise in federal borrowing is overwhelming efforts of consumers to reduce debt, leaving the economy deeper in debt than when the recession began in December 2007, a USA TODAY analysis finds.
The substitution of government debt for consumer debt helped end the recession and start a recovery, economists say, but it leaves the nation's long-term economic health in peril.
Households have reduced debt by $549 billion since 2007, mostly by cutting mortgages through defaults and paying down credit cards. During that time, the federal government has added more than $4 trillion in debt, pushing the country's total borrowing to a record $36.5 trillion, excluding the financial industry, according to the Federal Reserve.
"Government will eventually need to reduce the deficit," says Susan Lund, research director at McKinsey Global Institute, part of the business consulting firm. "But it's a very difficult balancing act to avoid withdrawing stimulus too soon while stopping before you borrow too much."
Lund, who studied 45 financial crises since 1930, says a familiar pattern is underway: Private borrowers reduce debt quickly, government borrows more, a period of government austerity follows — a process that can take five to seven years for an economy to repair itself.
"Is the debt level we have today going to be the death of us? No," says Martin Regalia, chief economist for the U.S. Chamber of Commerce. "It's the trajectory that could do us in. We know we're headed in the wrong direction."
Regalia says the recommendations of a special congressional deficit-reduction committee are crucial. The panel reports Nov. 23.
How the USA's debt picture has changed:
•Consumers. Households have cut mortgage debt by 10.6% since the mid-2008 peak, after adjusting for inflation. Credit card balances and auto loans outstanding are down 9.6%.
•Government. Federal debt has risen from 36.9% of the nation's gross domestic product when the recession began to 67.5% on Sept. 30.
The shift of debt from individual borrowers to all taxpayers will shuffle who pays it off. Younger people will face extra burdens, says North Carolina State economist Nora Traum. But the political outcome of deficit negotiations will determine how the rest is distributed among income levels, age groups, professions and regions. "With such uncertainty, it's hard to say who will be winners and losers," she says.
3) Generation Jobless: Young Men Suffer Worst as Economy Staggers-From The Wall Street Journal
Few groups were hit harder by the recession than young men, like Cody Preston and Justin Randol, 25-year-old high-school buddies who didn't go to college.
The unemployment rate for males between 25 and 34 years old with high-school diplomas is 14.4%—up from 6.1% before the downturn four years ago and far above today's 9% national rate. The picture is even more bleak for slightly younger men: 22.4% for high-school graduates 20 to 24 years old.
That's up from 10.4% four years ago.
In contrast to those men, Messrs. Preston and Randol are old enough to have had some time in the job market. They worked together installing granite counters before the housing bust.
Mr. Preston married his girlfriend and settled into what he assumed would be a secure pattern of long hours on job sites and enough cash to travel and enjoy restaurants and bars. Mr. Randol at one point felt flush enough to buy a 63-inch television set and a 50-gallon fish tank for his apartment.
Then the recession hit. Neither man has found steady work since that pays as much as he earned before. Mr. Preston's marriage broke up and he moved back in with his parents, an increasingly common pattern for jobless young men. Mr. Randol has made do with help from girlfriends and by living in houses packed with roommates to keep the rent low.
For such men, high unemployment is eroding their sense of economic independence. Their predicament reflects that of a generation of Americans facing one of the weakest job markets in modern history.
"We're at risk of having a generation of young males who aren't well-connected to the labor market and who don't feel strong ownership of community or society because they haven't benefited from it," says Ralph Catalano, a professor of public health at the University of California, Berkeley.
Mr. Preston has a steady job, making parts for recreational vehicles for $11 an hour. And living with his parents rent-free allows him to start paying off debt he built up during the slump, he says. But he keeps looking for work that will pay the $14 an hour he made installing granite. What made construction especially attractive was the potential for lots of overtime, which allowed him to beef up his paychecks.
On a recent afternoon, he sat in his parents' kitchen, combing online classified ads. But construction work remains scarce and other positions available for which he's qualified don't pay more than he makes at the factory.
Sue Preston, his mother, says several of her friends are helping out their grown sons, providing either money or shelter or both. She works in payroll at a telecommunications company, and neither she nor her husband, a truck driver who worked his way up into operations, has a college degree. That wasn't an issue when they were starting out, she says: Trade and production jobs were not only available, in many cases they paid enough that many blue-collar wives didn't have to work.
Now she worries that lower wages—and, more pressingly, the dearth of jobs—has left young men like her son disaffected and depressed. "They're working minimum-wage jobs and a lot of times, they don't have benefits, they don't have a full 40 hours a week. It's such a struggle they're kind of like, 'What for? All I'm doing is surviving,' " she says. "They have to move back home or they have to have multiple roommates. How are you going to take on a wife and a family in that situation?"
The share of men age 25-34 living with their parents jumped to 18.6% this year, up from 14.2% four years ago and the highest level since at least 1960, according to the Census Bureau.
Mr. Randol, an ex-convict who is in irregular contact with his parents, says he doesn't have access to the live-at-home reset button. So the Portland native is stretching his $187-a-week unemployment checks by living in a two-story $1,000-a-month house, 40 minutes away in St. Helens, Ore., that he splits with a couple and a friend whose claim to a small bedroom fluctuates based on whether he has a girlfriend.
Mr. Randol admits that over the past three years he's indulged in too much beer and "Call of Duty," the popular war-simulation videogame. Empty liquor bottles line the top of his kitchen cabinets as decoration. "I just hope stuff gets better," he says as he battles online rivals one evening.
Mr. Randol says he's looking for work but grumbles that the remodeling jobs advertised pay between $10 and $12 an hour, with no assurance of full-time work.
Mr. Randol was a poor student who got in trouble in high school and earned a high-school equivalency certificate in lieu of a diploma. He is the first to admit that a checkered past has hampered his job prospects. In 2004 he served a year for burglary and not long after added an assault charge that resulted from a fist fight during a night of hard partying.
But when the housing boom came, he says, his past wasn't such a big issue. After working fast-food counters and other minimum-wage jobs, in 2007 he landed a position installing granite for Fineline Pacific. He started at $10 an hour and within six months was making $15, with plentiful overtime. Mr. Randol told Mr. Preston to apply. He did and was hired.
"They were looking for anybody who would show up to work," says Ted Sherritt, chief executive of Floform Countertops, the Winnipeg, Manitoba, company that acquired Fineline.
Mr. Preston lived well with his construction money. He took out his girlfriend frequently and paid for a snowboarding trip, during which he proposed to her at the summit of Mount Hood, Ore. Married, they settled in Canby, Ore., about 40 minutes from Portland. "I was in a hurry to grow up," he says.
Both Mr. Preston and Mr. Randol say the first sign of trouble appeared on a white dry-erase board at company headquarters. The list of jobs became short, and then empty.
Mr. Sherritt says sales at the company dropped 40% through 2008 and 2009. When it reduced head count, Mr. Randol was among those let go. Floform acquired Fineline late in 2008.
Mr. Preston was kept on a bit longer than his friend but eventually lost his job, too. Mr. Preston was able to find work at a bike store, a skate shop and other retailers, but at lower wages than at his construction job and often with sporadic hours.
To save on rent, he and his wife moved to her parents' house in Salem, Ore., a 45-minute drive from Portland. Later, when the couple separated, he went to live with friends in Bend, Ore., 3½ hours from Portland. He found occasional jobs—one was at a gas station—but after a few months gave up and moved home.
"I wasn't living, I was surviving," he says.
Quote of the Day from Dave Ramsey.com:
Happiness depends more on the inward disposition of mind than on outward circumstances. — Benjamin Franklin
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