Last week the United States Labor Department announced that unemployment rates have dropped from 8.1% to 7.8%, the lowest since 2008, inspiring hope in many Americans that the economy is finally re-surging after four years of stagnation. So why are payday loans still on the rise? Much of the conversation around the decrease is centered on the political implications rather than the economic.
Because unemployment rates are fickle, the one-month decrease may not be a true indicator of economic growth. Regardless of whether the decrease is here to stay, the presidential candidates are likely to use the change to bolster their campaigns.
However, while many are focused on the impact that the lower unemployment rates will have on the presidential election, the candidates are not the only ones affected by this decrease. From the working class to the upper class, the payday loan industry to the housing market, the decline in unemployment rates affects all sectors of American life, although to what extent remains to be seen.
Undeniably, to the more than 456,000 Americans who found work this September, the change is more than just a slight blip in the economic radar, providing real opportunities to secure their finances for their families and futures.
The labor department reported an increase in 144,000 jobs in September-a relatively small but hope-inspiring number. In the larger scheme of things, 144,000 new jobs are not enough to revamp the economy: with 12.1 million unemployed persons in the country, substantially more jobs are required.
However, this increase is enough to affect American families and in turn businesses. In fact, the increase in employment corresponds with other signs of economic growth, including the highest automobile sales in four years and the stabilization of the real estate market, demonstrating that things are slowly getting better.
Yet, naysayers are still hesitant to accept the decrease as an indicator of things to come. The Labor Department's report indicates that the largest growth sector of jobs were in the public service industry, particularly in education and health care.
Yet, while public service jobs have been increasing for three month, manufacturing jobs have been decreasing, which bodes poorly for economic stability because these jobs are foundational to American financial growth.
Clearly, more jobs mean more familial security which affects all stratum of American society. More jobs equal more consumerism, which may have a domino effect despite the rather small decrease in the unemployment rate. Less clear is the impact that the decrease in unemployment may have on the payday loan business.
Consumerism drives the American economy; it likewise plays a role in the payday advance industry. And, while it may seem counter-intuitive, in this case more nationwide financial security may mean more individual payday loan usage. Because the payday loan industry relies solely on employed patrons, this shift may increase the amount of loans being processed by lenders. Unlike credit card companies who allow unemployed customers to charge and take advances despite being unemployed, payday loan lenders loan to those who have documented and steady income.
As such, an increase in employed individuals may align with an increase in usage of these types of loans. While these services can be useful in a pinch, they do not provide long-term solutions to economic problems. Especially following a financial recession, borrowers should be wary and wise when utilizing payday advance services.
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