4 Signs Economy is Heading Up for Seniors

The country is still weathering a perfect economic storm—weak growth here and throughout the world, depressed job markets, big deficits depressing government employment, and a Congress incapable of agreeing on paths toward recovery and fiscal responsibility. But despite all this bad news, the outlook for older Americans actually may be turning more positive.

[See 10 Places to Retire on Social Security Alone.]

Looking at employment trends for older workers, better prospects for consumer spending, flatter healthcare costs, and the first Social Security cost-of-living adjustment in three years, it's possible to envision an economic landscape for seniors that has at least a bit of light in it. We're not talking boom times here, but slightly better times.

Jobs. The national jobless rate in September was stuck at 9.1 percent, as modest private-sector job growth was countered by continuing cuts in government jobs. Republicans have argued that President Obama's original stimulus program was not effective in creating jobs. That aside, it seems very clear it was an important factor in maintaining jobs. For as federal spending at the local level has dried up, strapped state and local governments have been laying off thousands of people every month.

[See 5 Ways to Battle Economic Storm Facing Seniors.]

By contrast, unemployment rates among older workers have continued well below the national averages for all employees. The news has been particularly good for older men, but less so for women. Here are the comparisons for September 2011 and September 2010. (Note: These numbers are seasonally unadjusted and differ slightly from seasonally adjusted totals. Also, the figures for the smaller age groups of people 65 and older and 75 and older are more prone to sampling errors than the larger numbers for all older workers.)

Spending. It is harder to squeeze lemonade out of the stressed behavior of Americans at all ages who are struggling to make ends meet. Consumer spending generates 70 percent of U.S. economic activity, as measured by the gross domestic product, or GDP. And consumer spending has been in the dumps.

The government's authoritative snapshot of annual consumer expenditures, released in late September, shows that households spent 2 percent less in 2010 than 2009, on top of a 2.8 percent drop in 2009 from 2008 levels. What this means is that spending—not including the effects of inflation—was lower last year than in 2006. No wonder the recession has not gone away. The spending picture for older Americans was mixed. Spending in 2010 for people age 65 to 74 fell by nearly 3.6 percent in 2010, to an average of $41,434 per household. For seniors 75 and older, spending dipped less than half a percent in 2010, to an average of $31,529.

And the good news? We might have hit bottom. Consumer households at all levels have been slowly rebuilding their balance sheets, reducing credit and increasing personal savings. Spending has been up a bit in 2011 despite lousy consumer confidence. With prospects for modest inflation and near-term prospects for better news in big senior entitlement programs (see below), the outlook for seniors' pocketbooks is improving.

[See Medicare Drug Premiums Won't Rise in 2012.]

Healthcare. Insurance premiums for employer-based coverage rose by 9 percent this year and are poised to move still higher in 2012, according to a recent analysis by the Kaiser Family Foundation. That's not the story for Medicare, however.

Due partly to provisions of the health reform law, premiums for Medicare Advantage plans are projected to fall by 4 percent next year and will be, on average, 11.5 percent less than they were in 2010. Costs for stand-alone prescription drug plans (part D of Medicare) also are expected to drop slightly.

At the same time, the law has expanded the list of preventive and wellness procedures that are free to Medicare beneficiaries. More than 20 million older Americans have taken advantage of these expanded benefits, the Medicare agency says.

[See 6 Likely Social Security Changes.]

Social Security. For the first time in three years, there will be a cost of living adjustment (COLA) for Social Security recipients. A big spike in oil prices in 2008 led to the largest Social Security COLA in 25 years for 2009—5.8 percent. Oil prices later declined and contributed to a drop in consumer prices that produced no COLA for 2010 and 2011. When third-quarter consumer prices are announced on October 19, it's widely expected that they will trigger a 2012 COLA of about 3 percent.

Due to complex rules, the absence of a COLA has also frozen premiums for Medicare physician and out-patient insurance (part B of Medicare) for existing beneficiaries. So, the return of a COLA will permit some increase in those premiums. However, the overall moderation of healthcare costs for seniors should make higher Social Security benefits a good news story for most seniors.

Twitter: @PhilMoeller

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