Like many Americans, the jobs report cannot afford to take time off.
In recent years, the first Friday of every month—the day the Bureau of Labor Statistics (BLS) releases the previous month’s labor market data—has reliably been a highpoint on the collective calendars of the cadre of journalists, financial analysts, and policymakers who follow these indicators with the sort of frenzied fascination usually reserved for European football matches.
Times have been good. Through April, employment had increased every month since October 2010—at a clip of 202,000 new jobs each month. In tandem, the unemployment rate steadily dropped, dipping below 5 percent, a far cry from its recessionary peak of 10 percent in October 2009. Sure, there have been flies in the proverbial ointment—notably, wages are stubbornly stagnant and labor force participation has remained maddeningly muted—but all in all, the drumbeat of good news has been steadier than a metronome with training wheels.
That came to a screeching halt last month, when BLS reported May’s jobs gain to be just 38,000, far below analysts’ expectations (the preliminary number has since been revised downward to just 11,000). As is typical, the knee-jerk reaction was decisive, and damning: jobs were drying up, the recovery was over, and it was only a matter of time until the next recession. It was a third straight month of underwhelming job growth—from March through May, U.S. employers added an average of just 114,000 jobs per month, down from the 282,000 monthly average in the fourth quarter of 2015. Observers feared the emergence of a discouraging trend. The flames of fear were further fanned by Britain’s stunning vote to secede from the European Union, to say nothing of the economic instability threatened by a certain U.S. presidential candidate Who Shall Not Be Named.
But as of this morning, our economic order has once again been restored. Employers added 287,000 jobs this June, a healthy rate of growth. Better still, unemployment remained below 5 percent, even as more Americans joined the ranks of the labor force. Crisis averted.
The takeaway? The labor market had an off month. It happens. Now we’re back to business as usual. Once again, the real threat we faced was not financial collapse, but rather the hyperbolic myopia that so often imperils clear-headed policymaking. As we head into election season, that’s a point worth remembering.
Vacation: All I Ever Wanted
But there’s a more specific lesson lurking here as well: America suffers from an inexplicable aversion to time off. We are fundamentally uncomfortable with vacation. And it is in this sense that the recent gyrations of the labor market serve as a convenient metaphor for its participants.
It being July, school is out, the weather is steaming, and the daydreams of many Americans have turned to beaches, resorts, and other leisure-time pursuits. Unfortunately, for a sizable share of the workforce, these reveries remain just that—dreams. Just as the job market couldn’t have an off month, a perplexing number of employees do not have access to paid vacation. And like so many accoutrements of employment, time off is a benefit that is unequally distributed—another in a long list of dimensions on which vulnerable workers are given short shrift.
According to the 2015 National Compensation Survey, which is also conducted by BLS, 76 percent of private sector workers have access to paid vacation days. (The numbers for public sector workers are skewed by teachers.) But predictably, this varies systematically with socioeconomic status: just 40 percent of workers in the lowest decile of hourly wages get paid vacation, compared with 92 percent of workers in the highest decile.
Similarly, unionized workers are more likely to have their leisure time compensated—89 percent do, versus 75 percent among non-members—and full-time workers (91 percent) are far more likely to get this perk than their part-time counterparts (34 percent).
Cross-industry variation is also wide. Predictably, higher prestige sectors are more likely to get paid vacation, further exacerbating extant inequalities in wages, stability, and job satisfaction. While nearly all workers in such fields as finance and information can continue to receive paychecks during their summer excursions, just two in five workers in food services and hospitality—two of the lowest pay industries—get such benefits. Notably, blue-collar fields such as manufacturing and wholesale trade buck the trend, perhaps owing to traditions of union protections—and underscoring the importance good jobs for middle- and low-skilled workers.
While it is easy to dismiss vacation, and especially paid vacation, as a privilege rather than a right, a reward to be earned rather than a default granted, such high-handed attitudes are also short-sighted. Hard work requires recovery, and the causal chain can operate in reverse: adequate rest and relaxation can drive productivity. With job satisfaction and happiness comes diligence and dedication. A bit of balance can go a long way.
Some Schooling on the Labor Market
Of course, just as some workers are fantasizing about vacation, summer also means another another subset of the workforce is seeking to work more—namely, youth. Unfortunately, 2016 is not a good time to be a young job seeker. Indeed, the predicament of the youth workforce is indicative of the unevenness of the labor market recovery since the Great Recession. The basic point is this: while headline numbers like the unemployment rate paint a generally rosy picture, more comprehensive and nuanced indicators, such as the employment-population ratio (E-P ratio), show that the recovery is far from complete. (Readers wishing to further explore BLS statistics are encouraged to visit the official data page, here.)
At 4.9 percent in June, the overall unemployment rate has virtually returned to its pre-recession norm (unemployment averaged 4.6 percent in 2007). The same is true of youth unemployment, albeit with one important caveat: youth are far more likely to be unemployed than older workers. Among 16–24-year-olds, the unemployment rate is currently 10.7 percent, a number which rises to 16 percent if you only include those 16–19 years old.
While it’s reasonable to expect less experienced workers to have more difficulty finding jobs, it’s important to remember that the unemployment rate only counts youth who want to work and are actively searching for it. And while youth wages may be less essential to household finances than that of a primary earner, it is also the case that low-income families receive a needed boost when kids find jobs, especially as budgets are strained by income volatility and rising tuition costs.
Partly, high youth unemployment can be explained by higher job turnover, as youth experiment with different types of work. This experimentation is an important step in helping young people chart their future career courses. But early labor market experiences—for good or ill—can and do have enduring consequences for career trajectories, so it’s critical to ensure youth get started on the right foot. Resumes and networks built in the teen and young adult years are the soil from which lifetime work opportunities bloom—or wilt.
Where the picture gets even cloudier is the employment-population ratio. Unlike the unemployment rate, which considers only active job seekers, the E-P ratio measures the number of employed as a fraction of the population, providing a fuller picture of the labor market. In doing so, it provides an important corrective to the dominant recovery narrative: we’re not back yet. For the 16+ population as a whole, the E-P ratio in June was 59.6 percent, down from 63.0 percent in 2007.
While some of this decline was expected given the gradually accelerating retirement of the Baby Boomer generation, the trough has been deeper and more persistent than expected. In fact, if we consider only prime-age workers 25–54 years of age—which removes the effect of population aging—the E-P ratio is still off by a wide margin: 77.8 percent in June, compared with 79.9 percent in 2007, before the recession hit. Things are even worse for youth, where the E-P ratio sits at 49.1 percent among 16–24-year-olds and 29.1 percent for 16–19-year olds.
The figure below makes clear just how far we are from “full” recovery. While the unemployment rate has more or less completely reversed its recessionary hit, the prime age E-P ratio is only at 97.4 percent of its pre-recession level. That may not sound like much, but if the E-P ratio was fully recovered another 5.3 million Americans would be working today. Once again, youth face an even more of an uphill battle. The E-P ratio among 16–24-year-olds is only 92.4 percent recovered; among 16–19-year-olds, it is only 83.5 percent back to it’s 2007 norm.
Today’s jobs report was heartening, to be sure. It was a stark reminder of the perils of overreacting to single data points. The strength of America’s economy must not be extrapolated from a single statistic.
But it also underscores the enduring inequalities that permeate so much of our national economic life. Whether it be a desire to take time off—in the case of paid vacation—or a desire to work more—in the case of youth—opportunities are asymmetrically distributed, much to our collective detriment. In the month ahead, let’s do ourselves a favor and take a break from our single-minded focus on the latest jobs numbers, and instead devote our mental energies to devising employment policies that are more inclusive, and more forward-looking.