Psychological Obstacles
A common aphorism in economics is that all markets vacillate between greed and fear. That being the case, it remains clear that fear holds the upper hand with regard to the labor market. Perhaps the clearest manifestation of this is the labor market quit rate. The percentage of people in the labor force that quit their jobs in a given month has only re-traced about half of its recession-induced losses five years into an economic expansion.
The sorry rate of business formation is also a sign that fear remains ascendant.
The rate of business formation rose during the recession as some of the hordes of laid off workers decided to put out their own shingle. What is unusual is that the measure of entrepreneurial activity was still declining four years into an economic expansion. It is also noteworthy that the index has fallen below its pre-recession level.
A growing proportion of households have shifted into survival mode.
This shift in psychology is reflected in the declining share of households who are saving for retirement. Also, something else to consider is the proportion of people in the 80% to 89.9% income range who are contributing to a retirement plan has declined over the last three years. This shows that even upper- middle class households remain in survival mode.
