Businesses are exploiting desperate people willing to work for free to keep their employment prospects alive. Image: CC Mark van der Chijs/Flickr

U.S. businesses are benefiting from a huge pool of unemployed workers who are willing to work for free to gain experience. The rise of unpaid labor has some analysts concerned that the phenomenon will further undermine the anemic labor market. However, the Labor Department has strict rules about unpaid internships that bring legal risks to companies who benefit from desperate people who will work for free.

Desperate people will work for free

Unpaid internships aren’t just the realm of recent college graduates anymore. With the economy only creating enough jobs for one-sixth of the nation’s nearly 14 million unemployed, seasoned workers are joining the ranks of unpaid labor. Although there are few official statistics about unpaid labor, all it takes is a quick look at the job listings on Craigslist to see that businesses are exploiting workers ranging from accountants to nurses who will work for free now in hopes of a paying job later. Unpaid workers can gain valuable experience, references and avoid a glaring gap in their resumes, but some businesses get what they pay for. Without careful screening, unpaid workers can be difficult to manage, and some companies could be better off simply paying an employee.

Are unpaid internships getting out of hand?

The rise of illegal unpaid labor in the aftermath of the recession has raised red flags with the federal government. “Not So Equal Protection — Reforming the Regulation of Student Internships,” is a report issued by the Economic Policy Institute last April. The report calls for more federal regulation of unpaid internships. According to the institute, current regulations controlling unpaid internships must be reformed, not only for the protection of unpaid workers, but to maintain a healthy labor market and prevent any further decline in wages, which have been sliding for 40 years. In the report, the institute contends that the present lack of clear regulations exposes unpaid labor to workplace discrimination and encourages businesses to replace paid positions with unpaid internships.

Current regulations for unpaid labor

Despite the institute’s call for more government regulation, federal and state rules require that workers must be paid the minimum wage and overtime. Larger companies planning to take advantage of unpaid labor must follow provisions in the Fair Labor Standards Act. Under the FLSA, an unpaid internship must primarily benefit the intern, who must be closely supervised and not replace a paid position. Companies violating the law often must provide back pay, pay fines up to $1,100 per violation and damages that equal the amount of wages not paid. But the FLSA doesn’t apply to small businesses — companies with less than $500,000 in annual revenue — the sector that does most of the hiring in the U.S. However, if small businesses engages in interstate commerce, which can be as innocuous as accepting credit cards or placing phone calls to another state, they forfeit the exemption from the FLSA.

Sources

Fortune

Inc.com

The Hoya

Think the picture for the U.S. job market is crystal clear? Think again. (Photo Credit: CC BY-ND/Renee Silverman/Flickr)

Forbes reports that January unemployment figures paint what some people consider to be a rosy picture. A decline to 9 percent unemployment has been hailed as “the fastest pace in half a century,” and people say they’re finding work. However, this data conflicts with a recent business survey reflecting weak job growth in January, hinting once again that the national media’s view of the unemployment rate is as blurry as ever.

Labor Department encouraged by unemployment data

Government surveys attribute the unemployment slide to 9 percent as a natural by-product of strong January data. One government survey that included the self-employed found that more than 500,000 people found work, but a survey by the U.S. Department of Labor noted that only 36,000 net jobs were created, which happens to be only a quarter of what the U.S. needed to keep up with population growth.

Nigel Gault, the chief U.S. economist at job forecasting firm IHS Global Insight, told Forbes that the drop in unemployment was not a drop in the labor force, but of actual job creation – even if many of those jobs come via self-employment. The total gain of 165,000 jobs via self-employment in January is the highest total since last May. Yet the self-employed do not factor into unemployment surveys that focus on corporate payroll numbers, which causes some confusion when job market numbers are reported.

Those who give up are invisible

Another problem that plagues unemployment rate reports is that the U.S. government no longer counts people who have stopped looking for work as being unemployed, but independent surveys do keep track. According to Forbes, in January 2.8 million threw in the towel; 200,000 more than in December. Some were simply discouraged, while others returned to school. Regardless of the reason, the participation rate – or the percentage of those working-age people out looking for employment – hit a 26-year low of 64.2 percent.

Fewer jobs created in 2010 than previously thought

Government analysts’ early estimate was that 1.1 million jobs were created in 2010, but further analysis found that 950,000 was a more accurate total. As analysts continue to struggle with conflicting data, consumers in need of more money than their jobs provide will continue to look to payday loans, perhaps until the country’s economic direction becomes more clear.

Source

Forbes

Are you actually unemployed?

Identity thieves, who victimized nearly 11 million credit card holders in 2009, are targeting more job seekers and children. Image: Thinkstock

Identity theft is one of the fastest growing crimes in America. Nearly 11 million credit card holders each year are victims of identity theft. While everyone is vulnerable, trends show that identity thieves are increasingly targeting children and job seekers.

Ingenious identity theft scams

Victims of identity theft in the U.S. lost an average of $4,840 in 2009, according to Javelin Strategy and Research. New forms of identity theft are constantly emerging. Claudia Buck at the Sacramento Bee reports that three men were busted in Los Angeles last week for using electronic gadgets to scan credit card numbers at numerous gas station pumps. Buck writes that the state government in California has been warning about phony e-mails telling taxpayers their electronic tax payments did not go through. Identity theft is on the rise in every state, and thieves spend a lot of energy to coming up with the next scam.

Employers don’t need personal information

In the moribund job market, identity thieves see an opportunity to kick people while they’re down. Alison Doyat at About.com writes that identity thieves are adept at creating websites that look like  legitimate companies or agencies. An obvious red flag is raised if an online entity asks for personal data other than contact information at the beginning of the application process. Other red flags include ads promoting pay that seems too high for the job or offering payment in cash. Job seekers posting resumes at online career sites should never include Social Security numbers, birth dates or drivers license numbers.

Things parents should know

Identity thieves make big money exploiting children. Modern Mom reports that because children have a clean credit history, they’re lucrative targets. Children or parents commonly don’t discover they have been victimized until years later, when the kid applies for a credit card. Banks and the Social Security Administration do not give out birth dates, so credit reporting firms can’t verify age. Identity thieves often open lines of credit with a child’s identity when a parent loses a wallet or purse holding personal data like a child’s Social Security card. The easiest way to see if a child’s identity has been stolen is to request a credit report. No credit report on file means they’re safe … for the time being.

Employers are protecting bottom lines in a bad economy by shifting a greater percentage of health care costs to workers. Library of Congress photo.

Health care costs are falling … for employers. A study released Thursday shows that employers are shifting a greater portion of total health care costs to workers. While the premiums employees pay for employer-sponsored health insurance rose significantly, the amount their employers contribute declined slightly. Analysts say the shift in health care costs is a corporate survival strategy as the U.S. economy continues to falter. A persistently high unemployment rate that shows no sign of decreasing leaves workers with little leverage to negotiate a better deal.

Employee premiums outpace wages

Health insurance premiums employees pay for employer-sponsored family coverage rose an average of 13.7 percent this year, according to a survey conducted by the Kaiser Family Foundation and the Health Research & Educational Trust. The amount that employers contribute fell by 0.9 percent. In coverage of the survey, the Washington Post reports that employees are paying an average of 30 percent of the premium for family coverage and 19 percent for single coverage. The workers’ share of health care costs is the highest in 12 years of the surveys. Since 2005, the employees’ share of premium payments have gone up 47 percent while overall health insurance costs have risen 27 percent. Over the same period, wages have increased 18 percent and the consumer price index, a measure of inflation, has risen 12 percent.

Job market gives employers the advantage

The recession and a difficult job market are the primary factors responsible for the rising cost of employee-paid premiums according to Deborah Chollet, an economist with a Washington research firm. Chollet told CNNMoney that companies cutting staffs to the bone are looking for other ways to save money in the face of low consumer demand. One of the remaining options available is to pass on more health care costs to workers. She said that in a strong job market, higher turnover helps companies contain health care costs. These days, people who still have jobs are holding on to them tenaciously. They also use their health benefits more.

Employees pay more, get less

Workers are paying a greater share of their health care costs and getting fewer health benefits in return. The Miami Herald’s coverage of the survey reports that 30 percent of employers cut benefits or increased out-of-pocket costs for employees. Employers are also raising annual deductibles and 23 percent raised employee premiums. Employer-sponsored insurance covers approximately 157 million Americans, down from 159 million in 2009. A greater percentage of companies provide health benefits this year–up to 69 percent from 60 percent in 2009. However, the survey report suggests that many companies that did not offer coverage did not survive the downturn, leaving a higher percentage of survivors that provide health benefits.

Consumer confidence posted a modest gain in August -- data that bumped stocks and eased concerns that anemic consumer spending will derail economic recovery. Charlie Brewer/Flickr photo.

The Conference Board’s monthly report on its consumer confidence index showed that the metric used to gauge economic outlook actually bumped up a couple of points in August. The modest gain gave the stock market a jolt into positive territory Tuesday morning.

Consumer confidence index beats forecast

Consumer confidence rose in August to beat predictions. Bloomberg reports that the increase in the consumer confidence index to 53.5 from a five-month low of 51 in July could be a sign the biggest part of the economy may avoid a further slide that could effectively end a stalled economic recovery. But even with the increase, an economist told Bloomberg that the August consumer confidence figure is at a “stunningly low level.” Even so, higher confidence brings a ray of hope that consumer spending — 70 percent of the U.S. economy — will recover. To do that, companies need to start hiring more. Yet according to the Labor Department, companies created an average of 51,000 jobs from May through July — down from 200,000 the previous two months.

Consumer confidence report details

In addition to the consumer confidence index, the Conference Board report contains other details. MarketWatch reports that more consumers are pessimistic about the present situation of the economy, yet optimistic that conditions will improve. The Conference Board’s present-situation index — a measure of attitudes about business climate and job opportunities — dropped to 24.9 in August from 26.4 in July. The expectations index — a measure of expectations for a better business climate and more job creation — rose to 72.5 in August from 67.5 in July. Consumers planning to buy a home within six months moved to 2 percent from 1.9 percent. People planning to buy a car rose to 5 percent from 4.7 percent. An economist told MarketWatch that despite the August gains, consumer confidence is at “incredibly depressed levels,” compared with previous economic recoveries.

Bump in index doesn’t guarantee consumer spending

A consumer confidence index above 90 indicates a healthy economy, according to the Associated Press. Yet the August bump put the brakes on a sliding stock market Tuesday morning. About two stocks rose for every one that fell on the New York Stock Exchange. Like all recent market rallies, this one is expected to be short-lived. Most economic reports show economic growth is slowing, and the slight uptick in consumer confidence doesn’t guarantee an increase in consumer spending. A high unemployment rate continues to motivate consumer saving and debt reduction — behavior considered virtuous from a personal finance standpoint. But until the job market recovers and people open their wallets, the late-summer slump could continue for the rest of the year and drag the U.S. economy into a double-dip recession.

2009 was a difficult year for employers; many had to make cutbacks in salary and bonuses to scrape by. According to a survey done by Deloitte and Touche, 85% of all large companies eliminated their merit raise policies. Over 60% of senior managers had no increase in their pay day salaries and about 54% of all employees saw the same result. The good news is that now that the economy is set to turnaround, there are some signs that 2010 won’t be the same. Employers are revamping their pay schedules to start compensating employees once again, but not all are set to recover at the same pace.

Financial jobs set to raise salaries

When it comes to jobs that are set to thrive in the industry of finance, there is a short list of where to look. For anyone looking to move into a new market, there are definite places to look. Here are some of the hottest job titles to look into:

• Compliance Director. The demand for Compliance Experts and Directors is set to rise quickly. The entire financial industry was overhauled by the government and that created a lot of new rules and regulations for corporations to follow. As a result, they need officers to keep them compliant with government standards. The starting pay for these titles is estimated at $83,750.
• Senior Financial Analyst. The growth in this position is also the result of the financial changes in the market. Calvin Rodgers, financial analyst, said, “Corporations lost billions of dollars as a result of the economy and now if they are going to recover, they have to hire a strong force able to hone in on increasing profitability.” The starting salary for a Senior Financial Analysts is $74,700.
• Tax Accountant. Tax accountant is another field that is set to increase in popularity, and in pay. The starting salary here is about $46,500 but for accountants with over three years of experience, that figure can be considerable higher.

F jobs set to raise salaries

In the field of IT, there are also jobs set to increase in salary. IT is growing quickly and having good minds to keep up and set the stage for growth is crucial for a business’ viability. Here are some titles to watch out for:

• Network Administrator. Computing, networking, VoIP and software are all concerns of a Network Administrator. The starting pay is $54,000, but rises quickly for a worker who becomes more familiar with the company’s individual IT needs. Robert Hall, industry analyst, said, “IT is a necessity for every company and as the market continues to reinvigorate, more employers are going to want to pay for quality.”
• Systems Engineer. This is another job title that employers are going to be in demand of as the market improves. People who are able to help their employers build and maintain technical support for projects will earn $64,250.

Finding employment

For anyone looking to change fields now could be the perfect time if they know where to look. The above jobs all are set to not only be in high demand of qualified applicants, but are also showing signs that employers will consider them integral to the business. That necessity will push employers to offer top-dollar salaries to workers in the fields.

Many workers have given up their vacation time as a result of the recession. With heavy cut-backs and layoffs, employees are trying their best to make an impression on their bosses. That means not giving them time to even consider letting them go. People these days see taking a vacation as giving an employer the chance to see how well the company runs – without them. According to a survey done by Right Management, a human resource consulting division of Manpower, 66% of workers ignored their accumulating vacation days in 2009. With layoffs at record highs last year, many people who are employed are treading carefully with their jobs. Since the recession, the economy has eliminated 2.7 million jobs.

Should workers go on vacation?

The question remains as to whether or not workers should take their entitled vacation time in spite of the economic climate. Researchers say they should. There have been studies done and each one shows that workers who don’t take vacation time throughout the year feel higher levels of stress and greater levels of disengagement at the workplace. In particular with the stress of today’s world, taking a vacation can be critical to keeping emotionally sound.

Many workers who have remained employed throughout the recession have suffered. Although access to financial tools like personal loans remained, stress levels were high. They have seen colleagues let go and have had to pick up their slack with no additional compensation. Add to that the emotional drain of hearing the employment rate still at an all-time high and that makes for a worker who is stressed and worried. When that is pushed to the max, it can be disastrous.

Taking a vacation in this economy

Many workers also believe that in the current economy they can’t afford a vacation. They believe it takes a good amount of discretionary spending to go on a vacation. There is the added stress of leaving that plagues them, and they opt to not go at all. Connie Thanasoulis, a career expert at Vault.com, said, “It is silly to think that giving up vacation is going to make your colleagues think how important you are. Take your vacation and let them miss you.” Many vacation days are also not retroactive and once they are gone, they are gone for good.

It isn’t as difficult to take a vacation in the economy with a strict budget. Taking a few days to visit out-of-state friends or family can work well with a limited budget. In addition, today’s economy has pressed many vacation spots, hotels and bed and breakfasts to create deep discounts. A simple online search can bring a wide range of cost-effective places to go for any vacationer. Thanasoulis added, “Vacations are underrated. People think they are fluff. I believe they are crucial.”

The power of a vacation

Every worker in the market today has gone through their own strains and stresses. It’s not easy to perform at top performance while hearing that the job market eliminated over 2.7 million positions over the past two years. Of course people are worried, but there are emotional benefits of taking a break. Experts agree that vacations offer stress reduction, regeneration and rest and satisfy the innate need people have to feel that they are in control of their own time.

In today’s job market, finding payday cash is no longer a 9-to-5 pursuit for college-aged workers. More and more young people are finding that the non-traditional work made possible by working online is lucrative and flexible. Take Natalie Ann Roig, for example. She began a marketing internship and is able to clock in by working on her laptop. That means that she can work from home, at the library, at a coffee house or anyplace where there is wireless internet access. It’s the new trend in working today and makes virtual work even simpler to find.

The growth in virtual work

Steven Rothberg, founder of CollegeRecruiter.com, said, “In the last 10 years [virtual workers] have gone from being almost unheard of to being something almost every college student has at least considered.” It’s no wonder that consideration has grown due to the flexibility of the work. Most college students have difficult schedules that involve a few hours of free time in between classes. A traditional job wouldn’t work for them. Flexible virtual jobs are the perfect solution to the problem.

Cautions with virtual work

Just like any other line of work, virtual internships have a list of concerns for people to be aware of. First of all, contact information is important. With virtual positions, it is crucial for employers to be transparent. Though the internet is generally anonymous, when it comes to paid positions it shouldn’t be. Workers should have the name of a contact, phone number and business address of a company. The contact should be easily reachable for questions and direction throughout the internship.

Also, working for a virtual company should mean workers have the proper documentation of what their responsibilities will be. Interns should know the hours required, tasks needed to be completed, how long the assignment is and overall direction of the position. It should all be submitted and approved in writing between parties. Interns also should have to check in with their contact on a daily or weekly basis, depending on the depth of the project to be completed.

Finally, compensation is the most important aspect of the virtual internship. That doesn’t mean that the only compensation will be payday cash though. Some businesses offer college credit, cash or a combination of the two as compensation to their interns. Of course, like job responsibilities, this too should be submitted and approved in writing by both parties. If college credit is included, some faculty member or department head most likely will need to sign off and approve the program. Because requirements for credit vary from school to school, interns should thoroughly understand how the process works for their individual school’s intern program.

Internships and the internet

The new wave in the job market is to hire interns to complete tasks on the go. That means that they don’t have to check into an office and can complete most of their tasks in their free time. An internet connection and a laptop are the only two things needed today to earn payday cash or college credit. Interns should check the rules, but then enjoy the flexibility and learning of a virtual position.

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Payday cash may not be what it once was. David Becker of Wisconsin was laid off from his job in IT last year. It’s been a difficult time and he’s been looking for work in every place imaginable. He finally found a job, but it was in Nevada and the pay was $25,000 less than his old position. More and more unemployed workers are finding themselves in the same predicament. They take a job after months of searching, but have to accept considerably lower pay. People have been searching for employment for months now and with choices few and far between, they are settling for smaller pay, in return for security.

The new job market

In the recovering economy, one of the biggest problems is salary decline. Employers are starting to create new jobs, but being frugal with starting salaries, benefits, and incentives. Experts warn consumers that though there is research being gathered on the market, it doesn’t necessarily reflect the reality of what is happening. For example, the government reported that new jobs are being created. What they didn’t report was that those jobs are nowhere near the salary levels of pre-recessionary times. People, who used to earn $80,000 a year, may have to accept jobs for $50,000. That means they will have less money to spend, and less money to fuel the economy. Marisa DiNatale, director at Moody’s Economy.com, said, “In most cases, it means a subdued expansion, for sure.”

The long-term effect of lower salaries

People who are hired at lower salaries tend to lag behind for a long time. Playing financial catch-up is difficult. For example, a Columbia University study showed that workers laid off during the recession of the 80s earned 20% less than workers who weren’t laid off, even two decades after they were rehired.

The amount of payday cash workers have today is being hampered by employers, but employers are not necessarily to blame. They are like everyone else in the post-recession market wondering where the market is going and how quickly it will recover. DiNatalie added, “Employers are hiring, but cautiously. That probably is going to last for at least another nine to twelve months.”

Still the change in salary isn’t stopping people from taking lower-paying jobs. April Moore, an unemployed worker who took a job for 25% less than her former salary, said “I wanted the immediate security.” After being out of work for so long, many job seekers are finding themselves in the same position. They would rather have the security of any job at a lower pay rate, and then continue searching for a job that may not ever be found.

Hope for the future job market

Despite the change in salary, there is still hope for the job market. Traditionally, conservative pay is an offshoot of any decline in the market. Marco Von Wachter, a Columbia economics professor, said, “The first jobs to emerge from a recession typically are not well-paying ones.” Though payday cash may be lower, it is still a good sign that the job market is on the upswing. That is proof that the recession is over and the economy is starting to recover.

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(Photo from headsclouds, Flickr.com)

Freelancing can bring quick cash if managed the right way. Today’s job market is still struggling. The unemployment rate throughout the US surpassed 10% months ago. Businesses are still not creating jobs and a lot of the jobs that were eliminated won’t be returning. For example, Detroit’s heavy car manufacturing industry took a huge hit throughout the recession. The auto industry faltered and big companies in the city were eliminated. Those jobs will never return and that leaves thousands of former employees out of work and with few job prospects for the immediate future.

So what is the answer to lack of jobs?

More and more consumers are looking at the lack of jobs and growing less and less hopeful. Although having a “normal” 9 to 5 job was coveted in former markets, now things are quickly changing. The recession taught people well that trusting in employers is not always the best option. Slowly, as the market got worse last year, businesses used layoffs and cutbacks to make ends meet. Workers who were counting on their jobs to sustain them throughout the recession were left in the pool of millions of unemployed Americans. Workers who weren’t laid off also felt the strain. They were left to pick up the slack that laid-off workers left and they had to do it with no additional pay or bonus for the added work. Now that the recession is proving to be lasting longer than first projected, a good portion of consumers are taking things into their own hands and looking to freelancing.

The typical freelancer

Freelancing has gained a new respectability in the market due to the high unemployment. Jenny Hemphill of St. Charles, Illinois said, “I worked for a small finance company that took a huge hit in 2008. They cut back and that included getting rid of my position. I applied for over a year and found nothing. Freelancing was the option that made sense. I could take matters into my own hands, without relying on a job market that still is bad.”

The bad job market is still what is pushing people to move outside of the box when it comes to finding quick cash. Freelancing is becoming a primary and secondary job choice for thousands of Americans. For those who are choosing it as a career choice, there are some cautions. Experts warn that the first step to moving into freelancing is to do some math on the pay per hour. Tom Balliston, career counselor, said, “It’s always good to figure out exactly how much is coming in per piece or per project. Thirty dollars may sound good, but if the amount of work takes two 8-hour days to complete, that averages out to less than $2 per hour.”

Another good tip is to create a standard contract. According to Balliston, it’s a good idea to invest in hiring a lawyer for small businesses and have him draw up a contract. At minimum, the contract should specify in writing the number of hours expected, the cost for additional time, and the pay expected. Balliston added, “If you don’t specify in writing the details, you may find yourself negotiating various minutiae throughout the course of the project. Worse, if your contact leaves the company, you’ll have no proof of the terms you both agreed to.”

Finally, getting a good accountant is crucial to managing a freelance business. The basics of freelance tax law include saving 20 to 25 percent of all income for taxes and saving proof of all business expenses. There are also city and state licensing issues and tax regulations to sort through. It’s best to leave the details of that to the experts. Having a good tax professional can save workers from hefty penalties and fines.

Freelancing in 2010

Freelancing is projected to increase in 2010 due to the market. Consumers are tired of waiting for the job market to turn around and are making moves to find quick cash on their own. There are rules and regulations, though, and having a good team of professionals to help is an important aspect of freelancing.

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We aren't quite out of the recession yet. Using our savings wisely is as important as ever.

Savings, short term loans and strategic budgeting are all needed to manage in this economy. The recession is said to be over, but there are still a lot of troubled waters to wade through. This past week the Federal Reserve pledged to keep interest rates at a record low to help drive down the unemployment rate and encourage continued economic recovery. Despite nascent signs of a decline in new unemployment filings, the country still has a long way to go in terms of complete resurgence. Federal Reserve Chairman Ben Bernanke said that interest rates are going to be kept at an all-time low due to the following issues:

• The job market is still frail
• Consumer spending is still not on the upswing, despite the holiday season
• Credit lenders are still not lending like they did in months before the recession
• Businesses are not hiring permanent employees yet

These are the main issues that are plaguing the economy and without some notable change in each one of them, the economy will continue to struggle

The Interest Rate

The target rate for bank lending is anywhere from 0 to 0.25 percent. Because of this, commercial banks are able to keep their lending rates at about 3.25 percent, which is lower than it has been since the 1950s. These banks are the institutions that supply credit cards, home equity loans and other forms of short term loan products. Although many believe the low interest to be a blessing, there are still some issues with the move. First of all, people who are looking to save may or may not find adequate savings vehicles. For example, a survey of community banks showed that the average six to nine-month Certificate of Deposit has an interest rate of just 0.6 percent. Secondly, when the interest rate is kept at an all time low, people living on fixed incomes may find it difficult to manage. Michael Darda, chief economist with MKM Partners, said, “A lot of our clients are elderly and in former years lived on the interest they received from investments. Now that the interest rate has fallen so drastically, it’s difficult for them to manage without some supplemental financing.” A lot of these elderly are finding it necessary to use short term loans, savings and family help to manage through the difficult economy.

Mortgage Rates Kept Low

Since the financial market is stabilizing, the Federal Reserve is looking to close off some emergency lending plans. Most of them are set to expire in 2010 and they won’t be extended. This seems to be a confident move by the Fed that shows their belief that the economy is well on its way to recovery. One clear sign is the mortgage rate situation. Rates on 30-year loans are at 4.8 percent, which is down from 5.4 percent last year. The Fed said it has “leeway to hold rates at super-low levels because it expects that inflation will remain subdued for some time.”

The Future of Lending

The future of lending is still up in the air, but what the Fed has accomplished so far is good news. It is working to keep rates down to further encourage growth. Bernanke has made it his primary focus to sustain economic growth throughout 2010 and into 2011. The goal is to bring home equity loans, short term loans and investments back to a place where they can truly benefit the consumer.

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Red light on Wall Street, green light for payday loans for consumers. (Photo: flickr.com)

People everywhere are looking toward alternative choices – from payday loan funding and strategic bartering to rationing out necessities – to weather the current financial storm. In the recession, people want to make ends meet any way they can, and traditional options for funding are no longer readily available.

Consumers are more open to looking for financial help from less traditional sources and they are entertaining options they may not have researched prior. One Idaho (the Grammels) said, “We have been tightening up our budget as much as possible these past few months. The hope is that the recession will soon be over, but no one truly knows just yet what state it will be in when that happens.” Most consumers are taking the same attitude, trying as best they can to be ready for long-lasting financial strains in their budget.

Unemployment Rate Still High

The Department of Labor announced that unemployment claims are up to 640,000 this week, which is 15,000 more than anticipated. Analysts are closely watching the unemployment rates, knowing that their decline is indicative of an upswing in the economy. Numbers are proving that that upswing isn’t here just yet.

Economists too are vigilantly watching the unemployment rate, knowing that it could be an indicator of the recession’s end. The past has proven that when jobless claims peak, the recession has approximately six to 10 weeks left to run its course. In the past few weeks, jobless claims have remained somewhat stable, and on the high range. It may mean that they will level off soon and analysts are hoping for a substantial drop after that.

The Housing Market

The National Association of Realtors assessed that home sales fell three percent last month, down from 200,000 units sold in February. Analysts expected a fall in the house-building rate, but not this much. Lawrence Yung, the NAR’s chief economist stated, “Results were a little disappointing, considering homes are more affordable than they have been in years and mortgage rates are near record lows.”

The NAR also estimates that over 50 percent of home sales are from foreclosures or distressed properties. This number represents the byproduct of a recession, but there is some hope. As FDIC chair Sheila Bair states, “I think we’re past the crisis stage. We are in the clean-up stage now.”

That clean-up stage does not yet include extending loans to consumers like usual. People still will have to rely on alternative funding, such as payday loans, family loans and downsizing for a while longer. Though the banking crisis is hoped to be headed on an upswing, it hasn’t been formally proven by numbers just yet.

What This Means to the Consumer

Analysts are optimistically predicting that the recession is coming to an end and the U.S. will see clear indicators of this soon. For now, the housing market and job market are still leveling themselves off. It will take some time before consumers see the result of an improvement in the economy. This means that finding money to pay bills will still be a chore for most. Thankfully there are options available such as payday loans and discount stores, to help stretch the consumer dollar.

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