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Over the weekend we closed the chapter on the “mystery” of America’s collapsing labor force and the record 90+ million Americans out of the labor force.

As Pew reported, confirming what we had said all along, it has little to nothing to do with Boomers retiring – simply because under ZIRP they can’t afford to retire – and everything to do with Millennials staying in school because they can’t find the well-paying jobs they had expected, raking up $1.2 trillion (and exponentially rising) in government-funded student debt in the process. To wit:

More and more Americans are outside the labor force entirely. Who are they? According to the October jobs report, more than 92 million Americans — 37% of the civilian population aged 16 and over — are neither employed nor unemployed, but fall in the category of “not in the labor force.” That means they aren’t working now but haven’t looked for work recently enough to be counted as unemployed. While that’s not quite a record — figures have been a bit higher earlier this year — the share of folks not in the labor force remains near all-time highs.

 

You might think legions of retiring Baby Boomers are to blame, or perhaps the swelling ranks of laid-off workers who’ve grown discouraged about their re-employment prospects. While both of those groups doubtless are important (though just how important is debated by labor economists), our analysis of Bureau of Labor Statistics data suggests another key factor: Teens and young adults aren’t as interested in entering the work force as they used to be, a trend that predates the Great Recession.

 

But that’s just the beginning. Because as we have also covered on various occasions in the past, there is a just as important question of just what these “students” spend their money on. Among the items revealed: “A U.S. Middle District Court indictment alleges that Price spent much of the loan money on crack cocaine, cars, motorcycles, jewelry, tattoos and video games.” And iPhones of course, because someone has to indirectly provide US subsidies to the NSA’s favorite company (read “NSA Mocks Apple’s “Zombie” Customers; Asks “Your Target Is Using A BlackBerry? Now What?”).

Now we know one more thing that America’s young adults, of whom some 24% expect that their debt will ultimately be forgiven, are blowing Uncle Sam’s debt on. The answer: high-school level classes.

According to the WSJ, “college students are increasingly spending federal financial aid and taking on debt for high school-level courses that don’t count toward a degree, despite mounting evidence the courses are ineffective and may contribute to higher dropout rates.“

Shocking? Well not really: after all when student debt is easier to procure than subprime loans in 2005, and when nobody in government actually checks if it is used prudently, is there any wonder the same individuals who recklessly will spend money they can never repay on anything but their future, will spend it on the dumbest possible things? Perhaps it is more surprising that they used it for “noble” purposes in the first place.

The number of college students taking at least one remedial course rose to 2.7 million in the 2011-2012 academic year from 1.04 million in 1999-2000, federal data show. During the same span, the amount of federal grants spent by undergraduates enrolled in at least one remedial course rose 380%, after inflation, Education Department figures show. There was also a drastic rise in remedial students taking on student debt.

The one social class most “enslaved” by this “not quite free” debt handout? Poor, underprivileged students of course, those who can least afford to graduate with tens of thousands in debt.

The trends reflect a sharp rise over the past decade in enrollment at community colleges, which disproportionately serve low-income, minority and older populations. About 40% of students entering community colleges enroll in at least one remedial course, according to the Education Department; only about 1 in 4 of them will earn a degree or certificate.

 

“You clearly see that a big part of the problem is that students of color, first-generation students in low socioeconomic status are getting stuck” in remedial courses, said Eloy Oakley, president of Long Beach City College in Southern California. “They’re getting placed in these courses and they’re not coming out.”

 

Students are typically placed in remedial courses for English and math and because they score poorly on standardized tests. Federal law permits them to spend financial aid on as much as a year’s worth of remediation.

Ironically, the very classes this debt is spent to finance essentially assure that the student will never even succeed in graduating college:

Academics and senior officials within the Education Department increasingly view the remedial courses themselves as a major barrier to college completion, particularly among minorities. Many students become discouraged and could succeed without remediation, while others could benefit from shorter, more-targeted catch-up sessions, research shows.

 

Multiple studies have concluded that, for most students, remediation either hurts or has no effect on their odds of earning a college degree or certificate. The studies have compared the outcomes of borderline students—those just above and just below the cutoff for getting into college-level courses. In a 2012 National Bureau of Economic Research paper, two Columbia University researchers found that students who appeared to have been misplaced in remediation were 8% more likely to drop out than those who went directly into college courses.

As a result, some schools have finally started analyzing what the IRR of remedial schooling is: Long Beach City College is experimenting with how it assesses students and places them in remedial classes. Before 2012, it placed all students based on how they scored on a standardized test. Since then, the school has launched a program to place students from local high schools based on their grade-point averages, which officials believe are a better predictor of how students will perform in college-level courses.

Within the program, the share of first-year students at LBCC going directly into college-level coursework has tripled, to 39% for English and 32% for math. And the school finds that on average, students who would have been slated for remediation are performing as well as others.

 

 

Leangkheng Ouk, 20 years old, was slated to take remedial English and math at the school because she performed poorly on her standardized test, despite being a B student in high school. Under the new system, she went directly into college-level courses in 2012 and earned a 3.8 GPA before transferring this year. She now attends California State University, Long Beach, where she is on track to earn a bachelor’s degree in business management.

 

“I was glad they placed me in the higher courses actually on my level, so I don’t waste time and can be able to transfer in two years,” said Ms. Ouk, a Cambodian national and U.S. permanent resident who is the first member of her family to go to college. Ms. Ouk has used scholarship money, federal aid and wages earned from a part-time job to cover her education. “If I was placed in a remedial class I would have to stay in LBCC longer. I would have used my financial aid grants.

And now, after years of delays and long after the student loan bubble reached unprecedented proportions, the Government is finally deciding to “take a look”:

Now, the high dropout rate among remedial-education students—along with a sharp rise in student debt—is fueling debate about whether the government should be more stringent in awarding student aid. Critics—ranging from some think-tank academics and conservatives to a trustee of a community-college system in Texas—say aid should be targeted toward students who are better-prepared.

Keep in mind this is the same government that lied to “stupid” Americans to pass Obamacare. Then again, considering what these same Americans spend their unsecured, garnishable debt on, perhaps Dr. Gruber’s real and only crime was getting caught.

via Zero Hedge http://ift.tt/1ub8yiV Tyler Durden

If one were to look up the definition of hypocrisy, the image of BoJ head Kuroda should be front-and-center. Having tripled-down on his money-printing and ETF-buying largesse just last week, he came out swinging last night at the government’s fiscal irresponsibility blasting Abe’s policies by saying Japan’s fiscal health “is the responsibility of parliament and the government, not an issue for the central bank to be held responsible for.” Aside from the fact that he is directly monetizing all JGB issuance – thus enabling Abe’s arrogant fiscal stimulus plan (by issuing 30Y and 40Y debt), Bloomberg notes that “Kuroda is making it crystal clear the government has to tackle the debt problem and if fiscal trust is lost that’s not going to be on the BOJ.” The world has truly gone mad.

 

Seemingly paying the same lip-service as Bernanke and Yellen in the US and Draghi in Europe, BoJ’s Haruhiko Kuroda is carefully positioning the blame for lack of growth and economic chaos on the government’s lack of growth-oriented policies… and not the central bank’s enabling experiments… (via Bloomberg)

Bank of Japan chief Haruhiko Kuroda emphasized the onus is on the government to strengthen its finances after Prime Minister Shinzo Abe postponed a sales-tax hike and outlined plans to boost fiscal stimulus.

 

“It’s the responsibility of parliament and the government, not an issue for the central bank to be held responsible for,” Kuroda said when asked about risks to Japan’s fiscal health. The BOJ’s job is to achieve its inflation target, he said at a press conference in Tokyo.

 

Kuroda’s repeated comments at a press conference today on the importance of fiscal discipline indicate the governor is unhappy and may signal a change in strategy, said Credit Suisse Group AG economist Hiromichi Shirakawa.

 

…

 

“Kuroda is making it crystal clear the government has to tackle the debt problem and if fiscal trust is lost that’s not going to be on the BOJ,” said Shirakawa, a former BOJ official. “This is true, but he used to highlight that the BOJ and the government were working together. Abe might have created an enemy by postponing the sales-tax hike.”

*  *  *

So when Japan finally goes entirely tits-up, we now know, it was all Abe’s fault… and nothing to do with reckless money-printing and leveraged buying of the nation’s stocks by a maniacal central banker…

Is this not the same as a price-cutting drug dealer blaming the drug-addicted customer for not being able to afford better drugs?

via Zero Hedge http://ift.tt/14LlTtM Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

What do we do when the bubble economy cannot be reflated?

It is generally conceded that we are living in an era of Peak Everything: peak central bank omnipotence, peak powerless of the non-elites, peak wealth inequality, peak media-induced delusion, peak market-rigging, peak bogus official statistics, peak propaganda, peak bread and circuses, peak deception, peak distraction, peak sociopathology, peak central statism, peak debt, peak leverage, peak derealization–need I go on?

Few dare ask these questions as they raise a terrifying follow-on question: what do we do when the bubble economy cannot be reflated?

via Zero Hedge http://ift.tt/14LhuXB Tyler Durden

 

via Zero Hedge http://ift.tt/1AhLIhP Reggie Middleton

With surging homebuilder sentiment, we suspect the disappointing plunge in Housing Starts (-2.8% vs +0.8% exp) will surprise a few but there is hope… as Building Permits rose 4.8% (vs 0.9% expectations) on the back of an 8% surge in multi-family / rental units. This is the highest level fo Permits since June 2008 (but still over 50% below peak permits levels in 2005). The only region with any increase in starts was the South.

 

Permits beat but Starts miss…

 

Fool me once…or twice… but three times…?

 

 

The breakdown: Permits jumped entirely due to an 8% surge in rental akak multi-family units, led by the West where there was a 22% jump in permits.

 

On the other hand, single-family dropped even as single-family units posted a small pick up.

The one caveat: single-family units declined in all regions except the South, where starts jumped by 10%

Finally, no matter what the permits or starts data indicates, something curious is that the level of actual housing completions for single-family houses dropped 7.4% to 585K. This was the lowest monthly print in all of 2014! It appears once started, builders – super confident as they may be – are taking their good time to complete the project.

via Zero Hedge http://ift.tt/1qWtGcB Tyler Durden