The economic dilemma of left-behind Americans is driving the presidential election, but could it create near-term fixes that become longer-term problems?

Much has been made about the shrinking middle class but there is more to this story. When we hear ‘shrinking middle class', we think people have fallen out of the middle class, but the fact is that most households moved into a higher income bracket during the past few decades while low-income households declined. 

Higher-Income households as a total percentage of income earners climbed from 8.1% to 26.4%, up 225% since 1967.  The problem is 41.5% of households are stuck in the middle while 32.1% have lower incomes, which is the source of resentment and anxiety. 

If you’re part of the 73.6% of households, stuck in the middle to lower brackets, you are watching the prosperity train leaving the station and you’re not on it.  

Making matters worse, incomes have only just begun to rebound recently, leaving so many folks with bitter feelings over being stuck for so long.  The basic questions as follows:

1. Is economic advancement a right?
2. How can we make steady wage growth a sustained part of the American dream?

Obviously, higher wages aren’t a right, but we know the government will continue to push business, and to use policy and the tax code to put more money into the pockets of folks.  From a higher minimum wage to paid maternity leave, workers are getting more promises, which might relieve some anxieties; it also undermines the ability of businesses to make profits and investments needed to turn the economic wheel of the nation.

The nation’s voters must be very careful not to fall into the mindset that the government should be given more power to force higher incomes.  Moreover, greenlighting the government to spend money it doesn’t have may appease the frustrations of millions. However, the higher debt at some point will crush everyone’s hopes and dreams.

Politicians must not lose faith in the notion that a rising tide lifts all boats naturally; then again, I am not sure politicians on either side of the aisle believe that anymore.

Education is the Key

Then there’s education and there is simply no way around it. Education is critical and while there are a lot of great jobs going begging in construction and welding, and the local plumber who drives a Mercedes, the world has entered the knowledge economy and it pays big time.

Asian Americans understand this, and it’s making them extraordinarily rich.

College Attainment Demographics	Bachelors	Advanced
White	36.2%	13.5%
Black	22.5%	8.2%
Asians	53.9%	21.4%
Hispanics	15.5%	4.7%

Asian-Americans have been on a mission to attain higher education, putting them well ahead of other demographics has resulted in a massive advantage in household income.

To be sure, if it was only about education, then black Americans should earn more than Hispanics, but that’s not the case.  There are other factors from individual family values to community challenges; make no mistake, the big key to economic freedom now and in the future is education.

The Market

The market was split yesterday as the NASDAQ moved higher, led by Apple (AAPL), high technology stocks, and more takeovers in the biotech sector.  Apple’s strength couldn’t keep the Blue Chip Dow Jones Industrial average in the green, however.  The bigger news came from crude oil, where a report of a surprise inventory drawdown sent the commodity higher. The rally lasted 20 minutes, and then crude oil began to tumble, finishing down 2.7% for the session.

There are a few support points, down to $40.00.  Below there, the concern shifts from a supply glut to an indictment of the global economy.

Make sure you have cash, and make sure you are prepared to put that cash to work but don’t force the issue.

Today’s Session

Major indices continue to be indecisive this morning after Retail Sales and other economic data signal a late summer slowdown in many areas of the economy.

Consequently, it’s even less likely the Fed will hike rates this month and now even December is in doubt.

Fed Fund Hike Probability	25 bps	50 bps	75 bps
September Meeting	12%	-	-
November Meeting	18.3%	1.0%	-
December Meeting	42.1%	7.6%	0.4%

I continue to say this market needs good news for a sustained move highe,r although removing questions about the Fed removes a big speed bump. 

Comments

Your reasoning is absolutely right. Education is the key! Those refusing it are doomed! Philippe on 9/15/2016 10:03:10 AM

To reinvigorate and create a stable sustainable economic platform for America our Government must focus on the things that will increase Jobs and improve Competitiveness.Five things are essential to accomplish that goal: 1. reduce regulation 2. promote & help small businesses 3. Create meaningful training & education reforms & programs. 4. Invest in infrastructure which will improve commerce increase efficiency. 5. Tax & Budgetary Reforms to downsize govt Garro on 9/15/2016 10:16:12 AM

I agree that education is the common key to the future. However, real education is based on fundamentals: the 3 R's, not feel-good fluff. z on 9/15/2016 11:23:05 AM

Terrific article Charles! Very, very informative. Thanks. Doug on 9/15/2016 2:06:22 PM

College isn't for everyone. Education loans was the worst thing to happen to some people. When they flunked out and decided they weren't college material they were saddled with enormous debt. There are many oppurtunities to do well that do not require a college education like the plumber that drives a mercedes Edward Gildone on 9/15/2016 5:56:11 PM

Hear Hear, Edward Gildone. But that means someone has to get up and go to work everyday not afraid to get dirty. They could drive Mercedes, or 2016 Yukon Denali 4 wheel drive also. But they must look past the hype and just keep plowing the road ahead. WW on 9/16/2016 11:47:47 AM

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