In statistics classes, students are taught about the “bell shaped curve”, the pattern that forms when quantitative data are distributed normally.  Recent census data reveals a barbell-shaped curve; heavy on the ends with very little in between.

The Big Picture 

While the major stock market averages are poised to test 2007 highs, The Census Bureau reports average wages are back down to levels not seen since the 1990s.  The bottom 80% of Americans saw their average income fall while the top 20% saw their average income rise.  The middle class has all but disappeared. 

Although 2011 poverty levels were unchanged from 2010, it remained at the highest level since the Census bureau started collecting data on poverty in 1959.  46.2 million Americans are living in poverty, living on an annual income of $23,021 or less for a family of four.

Twenty-two percent of American children, 16 million of them, are living in poverty, with little or no access to food, shelter, education or healthcare. 

At the same time the average American household lost 23% of its net worth over the past two years, U.S. corporations were sitting on nearly $2 trillion dollars, paralyzed with uncertainty on everything from interest rates to healthcare.  Corporate profits are at record levels, in part due to the spate of layoffs and downsizing in the wake of the 2008 financial collapse. 

The Federal Reserve, in an effort to stimulate business activity, has lowered interest rates to virtually zero, to little or no avail.  Those record low interest rates have endangered the retirement of many seniors, dependent on interest income from bond investments.   Low interest rates also hurt retirees’ pensions and annuities while increasing the cost of long term care.  The only bright spot for seniors during the recent financial collapse was social security.  The Government Accountability Office (GAO) reported that the poverty rate for Americans 65 and older fell to 9% in 2010 from 9.7% in 2007, thanks to social security payments and cost of living adjustments.   

The same GAO study showed that Americans between 55 and 64 were hit hard by the recession, delaying retirement if employed and tapping into early Social Security benefits if unemployed.  Lack of employee-sponsored medical insurance forced many to go without needed medical care, while the loss in home values and 401(k) balances left them with little or nothing to show for years of work. 

I, Investor 

The Federal Reserve launched its third round of quantitative easing, or QE3, last week.  This time, along with Treasury securities, the Fed will buy mortgage securities in an effort to stimulate the fragile housing market.  Critics will point to lackluster results from QE1 and QE2 and raise the specter of inflationary pressures which, right now, are non-existent. 

But if the Fed can succeed in invigorating the housing market, the average American household just might get a break.  Those willing to move for a job opportunity might be able to sell their homes.  Communities affected by the foreclosure crisis may see some movement in inventory, an increase in revenue and relief from the fiscal crisis which sparked the loss of municipal jobs. 

If the housing market can catch up with the stock market, maybe the barbell economy can morph back into a bell-shaped curve. We can only hope.

What do you think?  Questions or comments encouraged. 

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