Despite numerous headlines of falling unemployment levels and rising asset prices, many Americans do not feel better off financially than a year earlier. In fact, the number of people who say they are worse off actually increased.
Overall, nearly two-thirds of people polled by Gallup believe their personal financial situations deteriorated or were stable over the past year. According to a new survey from Gallup, 42 percent of Americans say their personal finances are in worse shape than a year ago, which is 8 percentage points above the historical average. The situation was most dire in May and September 2008, when 55 percent felt financially worse.
Only 35 percent of Americans say they are better off financially from last year compared to the historical average of 38 percent. Meanwhile, 22 percent feel their financial situations have stayed the same. The results are not too surprising, given the slow improvement in the labor market.
The Bureau of Labor Statistics recently reported that the headline unemployment rate fell to 6.7 percent last month from 7 percent in November. That was the first reading below 7 percent in five years but still stubbornly high. However, the U-6 unemployment rate — which includes everyone in the headline rate plus people who are employed part-time but prefer a full-time position or want work but have stopped looking — remained at 13.1 percent. In 2013, wages grew only 1.8 percent.
A large catalyst for declining headline unemployment is due to job hunters dropping out of the labor force. The share of working-age Americans who were employed or looking for work sank to 62.8 percent in December, the lowest level since 1978. If the participation rate was closer to its average seen over the past three decades, the headline unemployment rate would be in the neighborhood of 11 percent.
On a positive note, Gallup found that the majority of Americans are optimistic about the future, with 55 percent predicting that at this time next year, they will be better off financially. Only 27 percent think they will be worse off a year from now.
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