The February jobs report revealed that the job market has indeed had a robust start to the year. The nation’s employers added 235,000 jobs in February after a strong performance of 238,000 in January.
The pick up in jobs momentum will get more press than it deserves—what’s more impressive is that we now have had an unprecedented seventy-seven months of job growth, averaging 199,000 over the last year of the Obama administration and continuing under Trump. The present administration is so new that its policies have yet to impact the economy, and even many of the “job announcements” made by companies in response to prodding by Trump have been in the works for months or years. Still, February brought news of bullish growth in blue collar sectors like construction (58,000—best performance since 2007) and manufacturing (28,000—best performance since October 2014). If those sectors can sustain their recovery, it will be real news for millions of working Americans, particularly prime-age men, who have been left out of the recovery.
Overall, while there are still millions of Americans whose skills are not being utilized, the long recovery has made finding a job much easier. In February, the unemployment rate ticked down to 4.7 percent because more Americans found work, not because they dropped out of the labor force (as was the case in previous months). Labor force participation trended upward to 63 percent, several notches above its nadir of 62.4 percent in December 2015. As more Americans return to job market, the share of prime age (25–54 years of age) individuals now working at a job stands at 78.3 percent, up from 77.8 percent a year ago.
With More Americans Working, How Is the Quality of their Jobs?
The key question in the economy now is not whether Americans have jobs—it’s how good they will be. Average hourly wages grew by $0.06 cents in February up which translates into a 2.8 percent annual rate. That’s better than the 2.6 percent rate in January, but still far short of the 3–4 percent growth rate that U.S. workers have enjoyed during past robust economic recoveries.
The key question in the economy now is not whether Americans have jobs—it’s how good they will be.
That’s important because workers may be largely on their own when it comes to wages over the next several years of the Trump Administration, as the government appears poised to take a step back from policies meant to raise pay. The administration has not made it clear whether they will defend stronger overtime pay protections put into place last year, or whether they will support an overdue increase in the federal minimum wage.
In a little-watched Washington move, the Senate voted to repeal the Fair Pay and Safe Workplaces Executive Order, which requires federal contractors to report wage and other labor law violations and have federal procurement officials use that as criteria to decide whether a contractor deserves government business. This is a big deal, because according to our analysis of data from the Office of Federal Contract Compliance Programs (OFCCP), nearly 24 percent of federal contractors evaluated (both at random or triggered by a complaint) had at least one labor violation from fiscal year 2013 to the beginning of fiscal year 2017. This is just one way that the Obama administration sought to go after one of the veiled causes of stagnating wages—domestic outsourcing.
A Closer Look at Domestic Outsourcing
While most media and political attention hectors companies for outsourcing jobs to China, domestic outsourcing is just as big a phenomenon. As I (Andrew) told a congressional committee last month, companies are increasingly embracing a business model that entails them holding on to only their core economic function and outsourcing out other work. That’s a problem for workers. Workers toiling in support functions employed at large companies would be more likely to get similar benefits as better-paid workers than those in janitorial or similar firms. Furthermore, contractors engaged in a vicious drive to be the cheapest are more likely to cut corners and pay low wages rather than invest in their employees.
Domestic outsourcing comes in many forms. But here’s some jobs report trivia—there is actually a monthly indicator of domestic outsourcing right in the jobs numbers. The Administrative and Waste Services sector is an industry composed of firms that allow companies to outsource functions that big companies may once have provided themselves. It includes temporary help agencies, accountants, janitors, security guards, private waste disposal and other similar contract help. This sector (composed of 9.2 million workers) has grown by 26 percent since 2010 (see graphic below). Outsourced jobs have grown nearly twice as fast (2.9 percent) as all jobs in the past year (1.6 percent). These don’t tend to be great jobs—included are janitorial service companies (paying $14.31 per hour) and security guard firms (paying $17.90 per hour). The increasing growth of domestic outsourcing will constrain the growth in wages.
The Obama administration recognized that the only way to change these jobs is for buyers of services to demand better standards. The last administration went a long way toward raising expectations for employers, putting in place new standards about minimum wages for contracted workers, seven days of paid sick leave, and rules to not discriminate against LGBTQ workers—but the Trump administration’s pledge to reverse executive orders has put these rules at risk.
Over the last year, too many in the media and in Washington have focused on the number of jobs being created and the dropping unemployment rate alone to paint a positive picture of the economy. President Trump could easily make the same mistake—focusing on the headline numbers and not the types of working conditions that everyday Americans are experiencing day after day.