3 economics trends stifling wages and pushing home prices lower: 1,000,000 people apply for 60,000 McDonald’s jobs, the college tuition bubble, and long-term shadow inventory.

We have troubling economic headwinds that are being felt on the shoulders of many American families.  Over a decade of stagnant wage growth is taking a toll on the psyche of many.  Many large cities still have inflated home prices yet these bubbles are slowly deflating just like the rest of housing in America.  The home price collapse stems from the massive bubble and mania, that could be categorized as stage one.  Yet stage two will be more ominous because home prices are now falling lower to reflect the lower wages many Americans are combating.  People can only afford so much based on their household income.  The fact that so many people are taking lower paying jobs and filling the seats at less than quality colleges for $50,000 a year shows how desperate many Americans are even though the recession has technically been over since the summer of 2009.  Let us examine three current economic trends that are likely to keep wages low and home prices just as low moving forward.

McJob wages


Many of you probably heard about the recent campaign McDonald’s had in searching for 50,000 workers.  In the media McJobs are always seen lower on the ladder for employment.  Work is work however and the demand shown at some places is startling:

“(Bloomberg) McDonald’s Corp. (MCD), the world’s biggest restaurant chain, said it hired 24 percent more people than planned during an employment event this month.

McDonald’s and its franchisees hired 62,000 people in the U.S. after receiving more than one million applications, the Oak Brook, Illinois-based company said today in an e-mailed statement. Previously, it said it planned to hire 50,000.

The April 19 national hiring day was the company’s first, said Danya Proud, a McDonald’s spokeswoman. She declined to disclose how many of the jobs were full- versus part-time. McDonald’s employed 400,000 workers worldwide at company-owned stores at the end of 2010, according to a company filing.”

You read the above correctly that for the 62,000 people hired, McDonald’s received over 1,000,000+ job applications.  When I see things like this I have to ask are these people even looking to purchase a home or are they merely living paycheck to paycheck?  I think many here are simply looking for a paycheck and an honest day of work.  In the media there is this implicit notion that many Americans are out of work because of their personal failings.  Here we have 1,000,000+ people willing to work in probably one of the less glamorous jobs in the world.  Do you think this was their first choice?  I’m sure many exhausted multiple job applications and opportunities before applying.

I’ve also noticed that many college institutions, many with less than reputable track records, are capitalizing in this trend and are promising high paying jobs so long as you pay the $20,000 a year at a paper-mill for-profit or $50,000 a year for a lower tier university.

The inflated graduate

With our blue collar sector dismantled, it is becoming more and more apparent that the only way into the middle class going forward is by going to college.  Yet choosing a career and school is critical.  Someone sent over this chart which shows exactly where the jobs are being added in this so-called recovery:


This I find troubling even more than the housing bust.  Since the recession started we’ve lost 3.5 million higher waged jobs (those that pay between $19.05 and $31.40 an hour).  But during the recovery only 179,000 of those jobs have been recovered.  You see a similar pattern occur in the middle range as well.  Yet most of our recent job growth has occurred in the lower-wage industries (those that pay $9.03 to $12.91 an hour).  We’ve lost 2 million jobs here yet 613,000 jobs have been added in this sector.  Not sure if that figure includes the 62,000 jobs added by McDonald’s?

It is amazing that the cost of college has far outpaced almost every basket of goods or products in our economy:


I think the above simply reflects the mythology that still pertains to education.  We saw this in housing where “homes never fall in price” or “a home is the best investment you can make.”  Those mantras are undergoing a drastic surgical alteration.  Yet a college education still carries this brand.  Forget the fact that we have over 4,000 colleges and universities and how many of these are actually worth the money?  Even if we say 1,000 are quality that leaves 3,000 ripping people off.  Even if you go to a top 100 school and pick a major that doesn’t prepare you for the current economy you are looking at moving back home with mom and dad except with boat loads of debt.  There is no reason someone should pay $50,000 a year to study basket weaving at a lower tier school.  But many are.  Late at night I’ve seen ads for the for-profit schools showing a kid playing video games and making it seem that he is only one call away from making millions a year (and of course $20,000+ a year in loans).

Of course there are many good institutions but just like buying a home with the correct mortgage and adequate income, this is a smart choice that needs to be walked into carefully.  Yet we are seeing more bad than good in the current market and the fact that student loan delinquencies are shooting up tells us something is wrong.  The culprits are more concentrated in the private sector:

college debt

Just another bubble in our economy.  And it looks like government funding may be cut:

“(Colorado Independent) Student loan defaults are on the rise, according to a new federal tracking system. For students who began repaying their loans in 2008, 13.8 percent have since defaulted. For profit institutions had 25 percent of their graduates defaulting after three years, and public four-year colleges had 10.8 percent of their graduates defaulting after three years.

“These disturbing numbers clearly indicate the need for local, state, and national leaders to strengthen their prioritization of higher education,” said United States Student Association President Lindsay McCluskey. “Young people face a staggering unemployment rate far above the national average and cannot afford to begin a post-collegiate life while saddled with tens of thousands of dollars of debt.”

U.S. House Republicans sought $64 billion in cuts in Pell Grant mandatory funding over the next 10 years as a result of the deep reduction it would make in the 2011 fiscal year, through H.R. 1. It would go on to make a 30 percent reduction in 2014 to Pell grants, and a 34 percent reduction in 2017.”

With many students coming out with the equivalent of mortgage debt before they purchase a home, many will carry this debt as an albatross for years to come.

Shadow inventory is here to stay

Finally the amount of shadow inventory in the U.S. is staggering.  There is still no clean mechanism in place to move out the excess inventory even though our government has plowed trillions of dollars to the banking system.  What we got in return was McJobs and the ability to watch banking profits soar.  Loans to small businesses are as tough as they were to get back in 2008 and consumer loans are contracting severely.  The liquidity went to one segment of our economy and banks are happy leaking out shadow inventory for years to come while hedging taxpayer bailouts in global markets and pushing Americans into lower paying jobs.

“(LA Times) ‘Shadow inventory’ of 1.8 million homes could prolong housing slump

The glut of troubled homes not yet on the market represents a nine-month supply at the current sales pace. That’s in addition to 3.49 million previously owned homes already on the market.”


Early in the crisis I thought that people would be up and furious about what was going on.  I’m not so sure about that anymore.  If a crisis that was the worst since the Great Depression didn’t get large number of Americans out to the streets and demand substantive action then nothing will.  Where is the organized movement to reform the capital markets?  Where is the multi-million person organization to break up the too big to fail banks?  This is why this leakage accompanied by falling wages seems to be the path forward.  Do you think big east coast investment banks care if certain prime cities in California see a 50 percent price decline?  They don’t and that is why we are seeing more homes leak onto the market.  The profits made globally are now surpassing the chump change in housing so expect more lower priced homes to hit the market to reflect the lower wages Americans are earning.  McJobs to accompany the McMansions.

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87 Responses to “3 economics trends stifling wages and pushing home prices lower: 1,000,000 people apply for 60,000 McDonald’s jobs, the college tuition bubble, and long-term shadow inventory.”

  • Most of the education to get a college degree does not relate to the job obtained. It is a waste of the country’s resources. Look at Germany. They do not waste their resources on useless college education. If the major is engineering, accounting, law,medicine or applied science, then it can be related to the job and worthwhile. The teacher’s unions are the big promoters of education and politicians that lie and do not want to tell the truth that they outsource the jobs in exchange for campaign contributions. Also the H1 Visas that bring over the Indian computer programmers and put Americans out of work after they train them.

    The politicians lie about the employment stats. They boast about the new jobs, but not all jobs are created equal as the charts show. There are powers in this country that want our workers to work for Chinese and Indian wages.

    • John

      Your comment is the reason we need higher education for all. First, college is not trade school. Even as a engineer at one of the UC’s I had to take ethnic studies, language and other courses not related to engineering. If you read the mission of the University of California it is to better educate people, so they don’t make such absurd un-educated statements such as yours. Even after I graduated, I still had to learn everyday on the job. The point of a degree from a college is to give you a background in a subject and more importantly to get you to think about how to look up information you might not know, a skill that obviously passed you over. Also the industry in California is STRONGER because of the Indians and Chinese. We ought to let more of them stay. We used to let them stay here and get the best and brightest from all over the world. A lot of companies in Silicone valley are founded by foreigners, who HIRE us. Maybe you ought to be putting your anger towards the failing high schools that don’t teach math and science, forcing the Universities to import bright minds from all over the world.

      • Silicone Valley?

      • Adam,

        Speaking as an IT manager in Silicon Valley, I can tell you that the one big reason I’m encouraged by my supervisors to hire H1-b is because of the perceived cost savings. Not only are H1-b usually willing to start for less, but more importantly (because of the terms of their sponsorship) they are much cheaper to maintain (no raises or bonuses, low turnover, etc). I say “perceived cost savings” because over the long term these H1-b employees end up costing us more when you measure cost relative productivity. However like our politicians, upper management is more interested in short term perceived gains than long term consequences.

        This is a general observation of course, and I’ve come across many exceptions.

      • RealityCheck

        It amuses me how people that paid way too much for a college education always take offense when someone challenges the cost vs. quality of such an education. Our higher learning institutions are no better than the bankers that got us into this mess. And it is people like you that mindlessly buy all the crap they are peddling and accept huge debt when credit is offered to pay for that education. Instead of defending such a greedy and corrupt organization, you would have been better served to question why you needed to pay such a high price for that education. You are the problem and not the solution.

      • Adam, your statement displays “classism”. You got a subsidized eduction at UC. Subsidized on the backs of working Californians who they and their children will never go to UC. They think that this has to change. Why should they subsidize your education so you can make a big salary? Why should the taxpayer’s subsidize one set of schools(UC) and not USC. There should be vouchers for all. The state no longer has the money to pay for your “well rounded education” in the arts, “ethnic studies, language and other courses not related to engineering”. If you like these subjects, then pay full tuition(e.g. out of state) instead of being subsidized on the backs of our workers. The mission statement of the UC system is for the benefit of the employees of the UC system. Such as the professors of the worthless subjects. The state has a problem with a lack of resources(revenue). Do we cut out the worthless courses at the UC system or cut grades 1-12 even more? If the UC system is such a great benefit to business, let them fund it. Also let the UC grad pay back the subsidy over 30 years. Students who had non subsidized colleges have large student loans to pay off because the tuition is higher than UC. Let us equalize the unfair advantage that UC system students get. THE FREE RIDE IS OVER ADAM.

      • CPA John… do you even think about what you are typing before you whack away at the keyboard? “There should be vouchers for all. The state no longer has the money to pay for your “well rounded education” …” The state can’t afford to pay for the UC system anymore but it should pay for everyone’s college education? Are you trying to be funny? Next time please try to put together a coherent thought before you reply to someone.

      • John CPA JD – let me guess… another Teabagger spreading the hate again.

      • John – we should not subsidize USC or private colleges.

        The idea of the UC is socialized education. It’s supposed to be paid for by taxes, and the tuition is supposed to be nothing. The qualification to enter is mostly academic performance, not ability to pay. The goal was to create a multi-versity, that spanned liberal arts, engineering, graduate studies, research, and functioned as an important driver of the California economy.

        Of course, this isn’t reality, but that’s what the goal was.

        Vouchers are bad. They are like free cash, and will only tend to drive up costs.

        If you want to give tax money to USC, then USC should become part of the UC system. They should cut the salaries paid to professors – it’s well known that UC profs earn less. They should allow the grad students to unionize, as they are at UC. And tuition should be dropped to $10,000 a year, like other UCs.

        If Oxy wants government money, they should do the same.

        Perhaps if all the private colleges went public, it would help keep a lid on the out-of-control salaries of top administrators, who are comparing their salaries with overpaid CEOs. Suddenly, without private options out there, all education becomes a “government job,” where the President’s salary is considered a pay cap.

        The harm of injecting cash into the private university system has been clearly demonstrated by the fiasco of the government guaranteed student loan. After government backed student loans were created as a response to rising education costs, students acquired a lot of debt. The available cash seemed to cause colleges to raise prices (or not tap their endowments as much).

        Vouchers would do the same – they would cause costs to rise.

    • College education is to get the pal prepared for future. It is not a job training.
      It has to be that way. If you are looking for tech training then that is different
      and no need to get a degree in that case.

      • RealityCheck

        Here’s a thought,

        Joint the military for four years. No better way to prepare our young people for the future. At 18 I had more responsibility, some that lives depended on, then you could believe. And now that I work in the civilian sector I am blown away by the complete lack of skills all these college grads have. Yeah they learned math and English, etc, but in my opinion most of them could not have made it in the military hence they are now running our corporations into the ground.

      • “Higher learning is just an overpriced, speculative investment that typically rewards graduates with dismal career prospects”, says billionaire Peter Thiel

      • @RealityCheck

        Couldn’t agree more. I joined the Army directly after high school. There’s nothing like pulling guard duty all night on the back of a Humvee in the middle of Louisiana darkness that will help you prepare your mind for your future. After my service, I bolted into school and never changed majors. (Most of my college buddies changed majors 1-4 times).

        I got out of school with minimal college debt, and pride in my time serving. Thanks to this blog, I’ll be making a good decision during home purchase.

    • I completely agree with CPA John here. I think college educations are not worth the $30/year unless you are getting an engineering, law, medical, IT or finance degree. In fact, the increase in tuition is almost 10X the rate of inflation from 2000 to 2010. I feel bad for people with loans for a for-profit universities. Over $120K in debt and making $40K/year. That’s incredible. Americans got too entitled. People want pensions, cheap health care, vacations, benefits, flexible spending plans on the back of future tax payers. I want to see a full audit for every public employee. Also, they need to be managed so we can understand whether they are performing well or not. I should not be able to work for the City of ____________ and get pensions, health care, benefits, 3-weeks vacation and personal time off. That’s completely unfair for private workers. If anyone wants to put a fund together to audit these guys….the first donation is coming from me.

  • “I’ve seen ads for the for-profit schools showing a kid playing video games and making it seem that he is only one call away from making millions a year (and of course $20,000+ a year in loans).”

    Doc I love you but gotta say animators, compositors, lighters, software engineers make good money. Those in games do much better than those in film. And if anything they’ll complain to you they work too much not too little. Basket weaving? Sure that’d be a silly degree in a dead industry. And you could say that about a lot of things, but not animation. 😉

    • speedingpullet

      I was about to make the same point.
      As an ex-games industry person myself (and Mr Pullet is still a programmer with a big dev company here on the Westside), I know that people make good money doing it, and that LA is actually a hub for game development.
      Add a little moonlighting in the film industry with fx and the like, there are some who can actually afford the kind of prices sellers are still trying to get for their ‘bijoux residences’ here in LaLaLand 😉

      I know there’s still a lingering attitude that ‘games are for kids’, but its one of the fastest growing industries around. Give it another 25 years and it will be a big a moneymaker for the region as film is now.

      • Workers in the film industry make more money than those in the game industry. The film industry has unions, the gamers don’t.

      • @Soundfxman: I would have agreed with you four years ago but my work has lost a lot of talent to games companies because they are paying more.

      • Ya, tell that to a PA soundefxman! The video game industry is on a long journey up.

      • Does that higher pay include a pension – one that’s not controlled by the company? Because that’s one of the benefits of the unions – they have pension funds, money for long-term care, and I think some have their own unemployment insurance.

    • You both make good points on the surface, but I have to agree that college teaches more than just the ability to make money–lot’s of people make good incomes and make stupid financial decisions and end up wasted. Better to make a modest wage and live a smart life. We have been divided and conquered though. We are easily swayed and distracted by wedge issues, talking points and entertainment.
      At least folks come here looking to learn something and not just watch porn and garbage on the net…thanks Doc, you’ve given us a lot to think about over the years.

    • Nathan the Elder

      “trades people”…plumbers, electricians, sprinkler installers, etc. are making much more money then our local family doctors from what I can tell. They tell me it’s because they work on a “cash basis” as opposed to struggling to collect from patients and insurance companies.

      My nephew dropped out from pre-med and switched to air-conditioning and now earns over $100k a year…with out the years of torture (and costs) of med school, internship and residency. It is a worrisome long term trend I’m afraid as “smart people” either go to Wall Street or into some trade as opposed to a “hard science.” Americans should not complain since as the good Doctor Bubble says, apathy reigns.

    • Well, it’s time for me to die.

      People refer with such gravitas to the game “industry.”

      And compare it to the film “industry.”

      Truly the entire economy is nothing but 20th century models of mass betting and wanking for speculative profit. And that in a nutshell is the issue.

      The nation’s infrastructure is crumbling–it is the last gasp of the last time that Americans were truly productive, rather than consumerist gamesters and generators of distraction.

      There aren’t enough health care facilities to go around for a burgeoning and aging population.

      Our nation is in desperate need of a radically energetic energy plan to take us off of the waste, glutton, and planet-killing idiocy of fossil carbon.

      Farmland is nothing but a growth medium that holds plant roots–there has been no major investment in it for 200 years.

      There is plenty of work to do, and plenty of people to do it, and plenty of people waiting to learn, and teach, the skills needed.

      Instead, we get distraction, diversion, bread and circuses and lotteries and casinos. And so on. And so forth.

      DHB, you are exactly correct. It is a nonsensical residue of the Boomer Bubbles that assumes that people are all itching to buy houses. One in five Americans is disconnected from work. Two in five are hanging on by the skin of their teeth. One in five thinks they’re OK but in fact are one accident, firing, or weather disaster away from insolvency.

      One in five still apparently believes that there is salvation in doing whatever the corporations say.

  • Then there’s inflation which is just an illusion because the things that are rising, like, oh, food and gas, are considered volatile and therefore ignored. Meanwhile, iPads haven’t gotten more expensive, so the Fed has decided that inflation just isn’t happening because they’re not considered “volatile” goods…which I guess is a suggestion that maybe we should all start eating iPads, the new, affordable food staple for the 21st century.

    Let them eat iPad!

  • Best place to get a job is the Home Depot parking lot every morning.
    Jobs are all cash, under the table, so no income taxes to pay.
    You get to use the bathroom in the store, and stay warm until you are hired.
    Thank you Home Depot- you are what made America great!!

    • Heck, why use those nasty dirty Home Depot restrooms when you can just urinate in the parking lot or if someone is looking just use the famous highway head, the Jack inthe Crack soft drink cup you just finished. Gawd, aint Amerika great!

    • Unfortunately the brownfaces dominate the parking lots and they don’t want palefaces to spoil their taco.

  • If there is anyone left thinking this is just another cyclical recession, there is another stat that is important. Over 44 million Americans receiving SNAPs ( food stamps). You must be total NINJA to get food stamps. Unlike the Great Depression, you won’t see long soup lines for this reason. The destitute are right in line with you at the grocery store, swiping their SNAP card. One-in seven Americans in this category definetely describes a modern world Depression .

    • And there SNAP cards aren’t going as far as they used to. Go grocery shopping lately? Budgets are going to get cut and food is getting expensive. The real recession hasn’t started yet.

    • About 8 or 9 years ago, the person in front of me in the grocery line was trying to pay for her groceries with a plastic food stamp card. I had never heard of such a thing, and neither had the cashier!! The customer explained that one of the advantages is that the recipients didn’t have the stigma of being on the dole.

      Now, of course, everyone on the dole has these plastic cards.

      This is politically palatable, because the farm states have a disproportionate representation in the US Senate. However, everything has a price, and we as a nation are broke, so prices must be scrutinized.

      My suggestion would be that anyone on the public dole, at least welfare, food stamps, or WIC, MUST be concurrently enrolled in a gardening class. Notice I didn’t say ATTEND a gardening class, but rather MUST BE CONCURRENTLY ENROLLED in a gardening class. This is the only hope to get these folks at least partially weaned from the public teat. I know that there are millions of gardeners, such as myself, that would volunteer to teach for a modest tax credit, or even free.

      • That sounds very nice on the surface, but where are they going to grow their food? Most Americans are urban and most people who are poor enough to be on the dole, are renters. And AFAIK most urban rentals are apartments, not houses. Apartments don’t have yards you can garden in. Most don’t even have balconys you can put a couple of potted plants on.

        Community gardens would be nice… if our governments got it together enough to set up community gardens, they would be fixing a whole lot of other things that are currently being ignored.

      • It’s almost impossible to grow anything in a cheap apartment. (They don’t have balconies.)

        The food stamp cards are better than the paper stamps. They reduce fraud, because the main fraud used to be people trading the stamps for cash.

      • Community gardens are good, but you have to pay to rent a space. So there’s a bit of up-front cost there. Also, they all seem to be rented out.

  • Anyone interested in the real issues at hand check out this link.
    Fight of the Century: Keynes vs. Hayek Round Two

  • After the A-Bomb

    This story is sad – so, so sad – not just the story but the implications thereof. ONE MILLION people applying for a job at McDonald’s? Boy is this very tragic! America is descending into THIRD WORLD status, becoming a nation of slaves.

    Oh, believe me, I know that working at McDonald’s is BETTER THAN STARVING, but what does this say about the future of our nation? How many workers at McDonald’s can afford to buy housing? My guess is close to NONE. This is a dead end road for most people. McDonald’s is a great place to work for high school students and the elderly retired, but My God, ONE MILLION people flooding into McDonald’s to apply for a McJob???? America has lost its greatness (along with its manufacturing jobs).

    And did you hear about the recent story about 3 people getting run over in a McDonald’s parking lot while at one of these job frenzy “opportunities”? Here it is….


    • ——believe me, I know that working at McDonald’s is BETTER THAN STARVING, but what does this say about the future of our nation? How many workers at McDonald’s can afford to buy housing? My guess is close to NONE. This is a dead end road for most people. —–

      I couldn’t agree more. I am sickened when people say things like, “At least they’re jobs.” Yes, they are jobs, but they are dead-end jobs that do not pay enough for an adult to eke out even a minimal living (yes, even if they go without cable — that’s another thing that sickens me, people claiming that not having cable will fix anyone’s financial problems). Although I do have to make one correction to your post. McDonald’s does not pay a sufficient wage for someone to feed themselves regularly, so you could indeed starve even with a job at McDonald’s. That’s why so many people decide to just collect welfare instead of working at McDonald’s; welfare is more lucrative than McDonald’s.

      • The cable complaint is excusable. Cable costs far more than it needs to, for what is usually lousy service, 300 channels of junk without a la cart pricing to encourage decent content, and second tier broadband. People should boycott cable on general grounds.

        Certainly, it is not enough. You might also have to trim other expensive monthly services and return to a 1980s lifestyle, which really was quite nice, if you can get past the hair. Cable is just the start.

        I frankly just don’t understand why college is so expensive. Are the costs of running a university really that much higher?

  • My McYoB might by my McMansion in Adelanto, but I won’t be able to drive anywhere or buy new clothes at McWalMart with my shrinking $ basket of goods.

    With all the cuts $500Mil more in cuts this year to UC ($200M), CS($200M), and community colleges($100M), I imagine the graphic for BA/BS borrowing will jump up. Higher education will be given a serious cost-benefit for those that must borrow upwards of $100k just to finish an undergraduate education. Who will pursue the humanities, arts, social science research, etc. looking at that kind of insurmountable debt ? With what jobs and paltry salaries (without benefits) will fresh grads begin to pay off their loans? Only the entitled will be able to afford a liberal arts education in 20 years at this rate.

    Anyone else who wants “higher education” will be going to a school solely for professional training. In a “free market” the diploma pushing institutions will be forced by the economy and competition to provide an education that gives the graduate real access to greater earning potential at a cost the student will be able to pay down within a decade.

    An affordable higher education has become far-fetched pipe dream in this employment market. If the hypothetical for-profit school graduate ends up with a McManagement position, the debt load will keep them from saving that big down or qualifying for a mortgage for a long time…unless they want to move to Vegas.

    • Look at the first graph above. The two costs that are growing at a rate higher than inflation are education and health care. It is not a coincidence that these two things are also heavily subsidized by the government.

      The government promises more money for education, the colleges raise their tuition – and the cycle repeats – just like the housing bubble.

  • Dr. You were wrong when you said,
    ” If a crisis that was the worst since the Great Depression didn’t get large number of Americans out to the streets and demand substantive action then nothing will.”
    We have had large groups protesting the bailouts, the national debt and the actions of the Federal Reserve. We were protesting on the streets and in Washington. The people that were protesting all of this this last two years is called the Tea Party. What do you think the Tea Party is all about?
    Why do you think the Tea Party appeared in the last two years?
    Doctor, I am proud to say that the people involved in the Tea Party are not as asleep as you claim. And despite the smears from the media and the Obama administration we showed up in full force this last two years.

    • The tea party are shills for the Koch brothers amoung other well healed who hijack this anti-government movement so they can lower their own taxes. Do you really think they care about anything else. You are being played. They dont give a damn about the working man. Let alone the poor. In their world you rich or your on your own.

      • CC
        It is a shame you are so uninformed. My guess is you are a product of our wonderful government schools. The Tea Party is not one entity, it is a basket of involved, concerned citizens that have chosen to stand up, let their voices be heard, and endeavor to begin returning this country to its founding principles and morals.
        It is your heroes – the statists, that have turned our system upside down, have thrown every possible roadblock in front of business people, and have brainwashed our children to believe in their marxist, socialist ideals. Never mind that such policies have failed every time and in every country they have been tried.
        People succeed when they are free to pursue their dreams. And all are lifted by their labors.
        Now we have the nanny state you no doubt adore. It, and the command & control government you also no doubt worship does nothing but make us all poorer as more and more capital and resources have shifted from the productive to the takers – both individuals and government.
        I feel sorry for you and your ilk. I just wish you wouldn’t take the rest of us down with your ignorance and your claims on my labor.


      The Tea Party was hijacked at its inception. It is nothing but the Republican Social and Fiscal agenda on steroids.

      If this country was serious about its people and cutting expenses it would adopt a German style health care system that covers all people at 40% less while at the same time the Germans have a longer life expectancy.

      I know I know, the Germans are all dieing miserable slow deaths in hospital waiting rooms for lack of health care due to their socialised medicine! But you have to wonder, if the Germans are all so sickly due to their health care, who is busy working and responsible for the economic power house that Germany is?

    • The Tea Party STARTED in response to the bail outs… I went to one of the first in Sarasota County Florida. I heard Abortion and “gay agenda” raised almost immediately. I knew it was crap then… and I decided to move back home California immediately. Tea party has been hijacked by the Big Business Lobbies and has become a sham, IMHO.

      • The funny thing is that we shouldn’t even have to bring up politics in a discussion about the issues of housing prices. In a normal world or business world, if you make a bad investment you loose money and have to take the loss, It is that simple.

        Unfortunatly, when the failure became reality, politics took over and President Bush and the Democratic controlled House and Senate, with the federal Reserve made the loosers the winners and the tax payers the bag holders.

        Another funny thing is that the new left wing president Obama and the Democratic controlled House and Senate rule exactly like Bush, only they were even more generous with the to big to fail culprits.

        I wonder if liberal Obama loyalists are aware that on issues like the national debt, bail-outs to the banks, the war in Iraq, Afghanistan, Guantanimo detanies, and promises of amnesty to illegal immigrants, Obama rules exactly like Bush. Unfortunatly Obama just added a third war in Libya to his credits.

        The Tea party is a conservative movement, but it does cross party lines. It dosn’t have membership or defined leaders. Individuals gain prominance in it or define themselves as part of it. There are no members that define the movement. Chris since a liberal Democrat Obama and a Neocon Bush rule identicaly on debt and war issues, you have to realize that whether you like it or not the Tea Party is the only real opposition to the bail-outs and the comming debt crisis.

        Chris, join the main stream media and smear the Tea Party all you want, unfortunatly all you offer are the same Bush/Obama remedies.

      • Sad but true. They only thrive as a coalition, and the fiscal conservatives need the religeous right to derail the democrats. so they make a token effort to appear to appeal to the far-right, but that pulls them off center. We are on life support and pulling the debt catheter might just kill the patient. We can’t go cold turkey, but the truth is Manhattan planned it this way. Why should they change? The only one that got in trouble was Maddoff because he screwed the Manhattan Mob. And still had to confess as the SEC would have never figured it out. Milken was Philadelphia, Enron Texas–everyone else that tries a Goldman heist gets taken down.

  • Well the stock market is flying towards the sky, unempeaded by any reality on main street. This tells me that these multinational companies are enjoying the high productivity they are getting from they’re lean underpaid non-unionized workforce who will loose they’re job to 1,000,000 other sorry souls if they don’t toe the line. This is the new reality. These companies have no need to hire no matter what. The new paradigm.

    Until the revolving door of finance and government cronies comes to a halt, this will not stop. The middle class will become the permanent underclass of working poor as the continued class warfare of the rich crushes our country.

    • Yes, but I believe that more than that is QE2 and zero interest rates. The market is at a top and only fools buy high, unless they are sure the government will keep the market propped up, and Ben said stay the course, the future be damned. Everything is at a top though–they have used the counterfiet money to drive up commodities and every investment vehicle they can think of. Student loans are the syndicate’s blood-sucking tool of choice right now.

  • I agree American’s have not been showing up in great numbers with massive protests as one would think, and as a result no arrest of those who are responsible for the great depression has happened, and there is no break up of those institutions the government deemed were too big to fail. But I do think American’s are ready to explode at the seams and go out in protest at the next big bank/wall street firm mess primarily because the Average American life has recently become far too expensive. Education is a scam for the many that obtain it given there are only a few professions that really need candidates with such extra education (medicine, law, engineering, math/education fields), and for such other proffesions the universities typically do not teach the real job skills necessary to succeed which can be learned on the job or through a quick trade school course. I have personally experienced high income with high student loan debt, however, was lucky to be soon able to escape the debt. However with that said, I ackknowlede that had a few things not gone my way I would be forever saddled with such debt or had to make a choice to leave this country to escape it. I read the engineer comments above and having done several out sourcing engineer and other consultant service deals I can vouch for the fact that the only factor used by corporations was not so much the education, since geographically we could find many workers with the skills and education, but the issue was money. Non-US engineers are sought after because the corporation could get more workers with a limited budget. So if you are an American engineer getting paid now be thankful because for everyone 1 of you, there are 2-3 more American engineers that are having trouble finding work due to department management decisions to outsource engineering support. Finally you guys do realize that McDonalds has more than food worker jobs, and there are high paying jobs within the McDonalds organization. Yes likely most of the new jobs at McDonalds are low paying, but why knock McDonalds for hiring in general more Americans with both low paying and high paying jobs.

    • —-you guys do realize that McDonalds has more than food worker jobs, and there are high paying jobs within the McDonalds organization.—-

      Those jobs comprise only a tiny percentage of the total jobs offered by McDonald’s, and 0% of the 60k jobs mentioned in this article. Every one of those 60k jobs was a low-paying restaurant gig.

      ——Yes likely most of the new jobs at McDonalds are low paying, but why knock McDonalds for hiring in general more Americans with both low paying and high paying jobs.—–

      I do not get the impression that the Doctor was “knocking McDonald’s.” He was, instead, pointing out that it is NOT a positive economic sign that American adults–including adults with education and skills–are tripping over each other just to get a dead-end, minimum-wage, usually part-time restaurant job with no benefits. McDonald’s is just fine for high school kids just starting out, retired folks looking to stay active, even for young people trying to get off of welfare and gain their first foothold in society, but these are NOT career positions, and a healthy economy cannot be sustained by an army of minimum wage mall and restaurant workers.

      You have apparently not considered this: once everyone in America is working at McDonald’s and other low-paying restaurant and mall jobs, who is going to be able to afford to eat at McDonald’s or buy things from the mall?

      • Your question is not serious right. Having worked in retail I can tell you pricing decisions are directly tied to what the consumer can purchase. Right now prices are high because the market demand and government intervention have propped them up. Take out the government intervention and with that crazy lending practices that come from knowing there is a government bailout down the road which is enabling certain people to afford higher priced items like education and houses, and the pricing will fall for sure. Working in retail as I said I’ve been involved in global markets and there are a lot of 3rd world countries where deals are made and guess what happens–the same product solder higher elsewhere is then sold for less in such markets.

  • Please write about the Silicon Valley!

    • As soon as the government stops doling out contracts that prop up virtually every business that does B2B with Silicon Valley, that place will become death valley…

  • We Don't Make Those Drinks No More

    No riots in the streets. Most people are more interested in “Dancing with the Stars” and easy access to Facebook so they can post what their feeling today. Few seem to know or care what goes on with banks and Wall Street; stock market soars almost daily, so things must be getting better. Get a low paying job or collect UE, move back in with parents or find some lonely employed single looking for a “soul mate” who can foot all the bills.

  • There is really only one reason to go to college. To learn how to speak Chinese, (Mandarin), and you probably don’t have to go to college to do that, but if you go, take Chinese History, learn the Chinese culture and then take your tuition money and visit China. Meet Chinese business people, and they will love it that you learned their language. And soon they will hire you as their American liaison and you will run a prosperous company. So jump on that global bandwagon right now, or forever be forced to the sidelines, forced to live on the margins of society.

    • Good post. you are spot on. I have a friend that works exclusively in China and India and that is where the action is–no doubt. Instead of bemoaning them taking our jobs we should accept and embrace China as the new driver of the world economy. It sucks, but it is what it is. We dug our grave and we can either sleep in it or walk the night as the zombie nation we are destined to be. We can’t pay our debts and soon not even the interest–QE2 goes on with no end in sight.
      We were supposed to carry the world economy after WWII with the Bretton Woods agreement–now we have bankrupted the free world we were supposed to protect.

    • Offering to teach English in some obscure Chinese city (not Peking, Shanghai or Canton – preferably a city you can’t pronounce) will get a paleface learn Chinese faster than 4 years of learning chinese in an american university

  • What was that about “jobs Americans don’t want?”

  • I call BS on the MCDs “million man march” being a big deal. It only averages out to just over 80 applicants per US store. And how many people on unemployment went down just to show they looked for work. In agreement with most of the rest of the post though. Fact is people have to start going out and competing in the independent business market. The days of making a good wage as a W2 guy while working at the same company for years are pretty much over for most people.

    • Those are good points, but it doesn’t change the argument. Even with the propped up auto industry, there are hoards of folks out in the cold. There are four drivers of the economy:

      1) government borrowing
      2) Pharmacuetical / healthcare (giant sucking sound)
      3) Entertainment
      4) Technology

      Does any of that have any long-term benefit to US economy?

      As long as Apple can keep fooling everyone into believing that having their crap makes them cool, we got just one killer export (oh, and soybeans). Intranational retail (service) does not help the balance of payments, so the death of the petrodollar will crush us all. The world is tired of taking our paper and promises in trade for tangible goods–it’s not just Iran and Venezuela…

  • I recommend listening to Frontline’s podcast “College Inc.” The problem is that these private (often tmes online) colleges, like Pheonix university, were enrolling students that had no chance at succeeding –because they were able to dole out Federal loans. So these universities were making a huge profit off Federal loans. White many of the students either graduated or dropped out, not adequately prepared to get a job, and stuck with a mountain of debt they can’t possibly pay off.

    • It’s not all that different in the nonprofit colleges either. Our state U is dragooning every student it can, and will hold their hands and get them graduated, just to get that tuition money, and the student need only go along. Thankfully, plenty of freshmen realize they’re in over their heads academically and walk away in the first semester.

  • Boycott Mainstream Media

    You are right – the elitists use TV, and garbage like FaceCrook to distract the people, all they while they are being led to their slaughter. I do not watch ANY TV – it’s absoulute vile garbage. I don’t visit any mainstream web sites either – they are all full of LIES, LIES, LIES.

  • Americans have been brainwashed into thinking they’ll be a millionaire by the time they’re 30 and they’ll get the repress the lower class. By the time they realize it’s bullshit they’re 75 with little in their retirement account and they’re in terrible health.

  • Dr. HB, thanks for shedding the facts on the “Job Recovery”. The housing market is definitely in stage 2 where jobs can’t support mortgages. Now were in for a big drop, since the government kool-aid is all but gone.

    The Westside is seeing foreclosures in all areas now, even North of Montana in Santa Monica. Just waiting until total capitulation drops prices another 25%.


  • Manhattan Transfer

    This is just another facet of the great manhattan transfer. Salie Mai-Lai has been sent to massacre an entire generation. Most are blind to the fact that Manhattan has put the entire middle and working/not-working classes into bondage. They make TV and movies to tell us how we should be living, then offer us credit to make believe we can live that life. So we let manhattan eat our children so they can stay fat and happy. They we spend all our time complaining about the president and congress–as if they are the one’s driving the ghost train…

  • In the last decades of the Roman Empire, the state used events at the Colusiem to distract the populace from real problems( “Bread and Circus”).
    Today, Dancing with the Start, America Idol, and worshiping overpaid atheletes serves the same function.
    More people know about what celebrities are doing, than what their own kids are doing. (Columbine- Parents said they “had no idea” of what their sons were up to.)

  • Who give a c___ about what Charilie Sheen, etal, are doing?
    Does this really have any impact on your life?
    Take your kids to the park.
    Get a life,people.

  • I was in Santa Cruz this weekend. One thing I noticed (was reading papers) was that rent there is absolutely insane. Like, off the charts insane on a per foot basis, even when compared to the greater bay area (except for maybe SF proper). $700/month for a closet, in converted garage, with bathroom facilities in another building. I’m pretty sure that this is due to college loans. Landlords know full and well who the renters will likely be (students) and know they’re just putting their lives on charge for the next few years, and UCSC students are a captive audience for housing (where else are you going to go, Watsonville?), so they milk it for all it’s worth.

    I’d be interested to see some studies showing rents in similar college towns with “captive” audiences- Santa Barbara definitely, perhaps Claremont, but probably not Davis. When you’re taking out $80,000 in loans, what’s another 10k to you?

    • WillTheLastCalifornianTurnOutTheLight

      Davis, CA is also in that group of cities where landlords milk the rent with sky high prices, knowing that the UC students will pay it. We left Davis for that reason. $1200/month for a dingy, dark one bedroom apartment there.

      • Interesting. I’m an Aggie. When I was at Davis, more than 10 years ago, you could get a three bedroom for $1000/month. Compared to places like Santa Cruz and Santa Barbara, rent was dirt cheap due to Sacramento being so close. Of course it’s anecdotal, but it sounds like a huge increase.

    • It’s similar around UC Irvine. The lowest apartment prices I just found from looking around online were about $1400 for about 750 square feet. And those aren’t the apartments nearest campus. Those all say “call for pricing”. Translations: You don’t even want to know? If you have to ask you can’t afford it?

      Note this is despite (or because of ?) a big increase in on-campus housing in recent years. I’m sure it doesn’t help that the Irvine Company has a near (if not complete) monopoly on apartment complexes in Irvine and parts of Tustin.

  • DHB, when are we going to get the Doctor Education Bubble blog?

    I’m frankly curious why .edu prices are up so much. Did costs really rise that much? It boggles understanding.

    • The Librarian

      One reason education costs are up is the consolidation of the publishing industry. Colleges and university libraries are research based institutions and require libraries with many academic publications. Publications that are now owned by just a few companies. These companies have raised the price of the print journals through the roof and the licensing of the electronic versions are outrageous. A university like UCLA spends millions of dollars each year for subscriptions to access to these electronic academic publications.

      • While I really appreciate your response, pinning the extraordinary rise in tuition on a single item in the inversity budget seems mathematically improbable. If libraries really were pirarily responsible for the rise, then they should be over half to 3/4 of the budget by now. I can’t believe that any administrator would allow this to happen unless it was required by law or some such.

        Likewise healthcare costs seem unlikely to be the cause. Tuition costs are rising at nearly doubt the rate of health care.

        A deep dove into a typical university’s budget would prove educational, both as a standalone exercise and also to see and inflation adjusted comparison between the budget today and the one in 1970. Personally, I suspect without proof that the problem is endowments. Either they arent providing the returns they used to, or it is now fashionable to milk students so that the endowment can grow.

      • The blogosphere suggests the problem is actually an outsized growth in support staff, not endowments. It is difficult to believe.

    • Ian, I join my question to yours and have asked DHB this in the past as well.

      The Ed Biz emerged from the same models of economics and society as everything else the Baby Boomers gave us in their rush to establish the FIRE and intellectual property economies as the nation’s specialty.

      Ian, here ya go:


      There is just one way to survive, and that’s living by your wits (as my ball busting old college English prof used to say). In a higher education system where people are systematically trained to be witless, they are trained to rush in the direction of wherever McIndustry farts its magic pixie bling dust. Of course by the time you get there, ten million others beat you to it. So then the response is to go back to school for the next rainbow unicorn, right?

      Debt is evil. It is that simple. And interest debt is evil on crack and steroids, in a salt flats rocket car. But when people have no hope of working and saving for what they want, that is acquired only through cash purchase, and when they must rent more and more of their lives from authorities with more power, then they will chain themselves to banks, financiers, Wall St., etc., unless they had really good parental example saying NEVER DO THIS.

      From my 30 years of experience in the Ed Biz, I can tell you, Ian, that financialization is the biggest boogeyman in the explosion of schooling costs. But the much bigger issue was the inflation of the administrative caste in “higher ed.”

      Granted, in many states, these were the only jobs being created for a long time, as America’s productive capacity was emptied out and offshored and redefined as video games and online betting and porn. I would not have a middle class life today–in fact I would have died in the slum of my and my ancestors’ births–long ago had it not been for edustration employment.

      My skill with tools, materials, processes, and numbers meant nothing. All that mattered was that I knew how to go into a roomful of snitting Ph.D.s and bring them to some candy-ass consensus over things that ultimately mattered not one whit. And then I could make them sound more intelligent on paper than they were. Since I never took it to heart I could let a lot of things roll off my back. That disengagement was redefined as professionalism and nondefensiveness. (I wasn’t cynical, I just felt that most of what people were bickering about in those meetings was pretty silly, a bunch of power struggles. I tried to use my positions to get citizens institutional access…with mixed success.)

      I never intended that I’d use my gifts and my own hard-earned schooling that way. But let’s face it. This nation has been in a real recession of actual productive accomplishment since the 1970s. Those of us who hit the job market in the ’70s and early ’80s recession knew one thing: real accomplishment meant nothing.

      And the kind of accomplishments handed to us to pursue by the “new economy”…well, they required a stronger stomach than I had. Like the time I got offered a job at CBS’s research division in Manhattan, where they were all excited about their thrilling major research agenda: figuring out which of Dan Rather’s vest colors contributed most strongly to viewer perception of his credibility.

      We are coming out of a very long period of nonsense, bullshit, fluff, bubble, and crap. If I didn’t have better things to do, I’d love to take Mister Bubble and do him up like a zombie Juggalo. That in my mind is the face of the Ed Bubble. He gets in the tub with your children early. He’ll bubble your nose, bubble your skin, it’s so much fun when you are in with…MISTER BUBBLE.

      Sorry to run on. One sits on certain things for decades, till the time seems ripe to talk about them. Then one can go a bit overboard.

  • I agree about the education bubble, but $18-$31 an hour is a high wage earner? My math says this is $37,000 – $65,000 a year. I don’t even consider $37,000 a year to be a living wage. How much can someone making that kind of cash put away for retirement or even pay down things like student loans? $65,000 is just enough to live and possibly save on if you manage it wisely, but here in SoCal you certainly aren’t gonna be a home owner in the coastal counties on that wage even after the bubble burst.

  • For most people attending college, it is not to enlighten themselves with an education. It is to provide a knowledge base on which to get a higher paying job. Colleges ALWAYS cite the “degree holder earns 1 million more on average in their lifetime” statistic, when recruiting students.

    However, this number is skewed. Remove the “professional” degrees, such as finance, accounting (many whom go on to certifications), the bachelor’s degree holder that also has a Master’s, and I’m guessing this number drops quite a bit. Remove the sciences, and I bet it drops even further.

    As for UC schools, I was horrified to see some of the students who were admitted into Ucla when I had been rejected. Many of those students literally could not write English well (We had group papers and I had to edit their portions like crazy). What they WERE very good at, however, was gaming the system, by taking the easiest classes and sharing notes by using networking and ratemyprofessor.cm to boost their GPA.

    My opinion of the Uc’s dropped tremendously after seeing this. I agree that young people should have educational opportunities regardless of background… but we also have a wonderful Cal State system! I am all for cutting funding to UCs or even turning them private. Did you know that UCLA has an endowment? Guess how large it is?

    2 billion dollars!

    Why does the state tax payer have to subsidize that school? Place the cost burden on the student for UC, and keep community college and cal state subsidized. 30k is not that much (it translates into about 18 months of living with a roomate on the nationwide median college grad salary of about 40k, after taxes). On average the UCLA undergrad leaves with a mere 12K in debt after 4 years. In times like these, with an endowment that big, and students of such questionable quality, that’s just disgusting.

    I’m very glad to be heading to Boston soon.

  • “Education is a bubble in a classic sense. To call something a bubble, it must be overpriced and there must be an intense belief in it. Housing was a classic bubble, as were tech stocks in the ’90s, because they were both very overvalued, but there was an incredibly widespread belief that almost could not be questioned — you had to own a house in 2005, and you had to be in an equity-market index fund in 1999.

    Probably the only candidate left for a bubble — at least in the developed world (maybe emerging markets are a bubble) — is education. It’s basically extremely overpriced. People are not getting their money’s worth, objectively, when you do the math. And at the same time it is something that is incredibly intensively believed; there’s this sort of psycho-social component to people taking on these enormous debts when they go to college simply because that’s what everybody’s doing.

    It is, to my mind, in some ways worse than the housing bubble. There are a few things that make it worse. One is that when people make a mistake in taking on an education loan, they’re legally much more difficult to get out of than housing loans. With housing, typically they’re non-recourse — you can just walk out of the house. With education, they’re recourse, and they typically survive bankruptcy. If you borrowed money and went to a college where the education didn’t create any value, that is potentially a really big mistake. The Great Recession of 2008 to the present is helping to bring the education bubble to a head. When parents have invested enormous amounts of money in their kids’ education, to find their kids coming back to live with them — well, that was not what they bargained for. So the crazy bubble in education is at a point where it is very close to unraveling.”(Peter Theil)

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