Today’s Labor Department report starts the Labor Day weekend on a downbeat as we pause to think about the state of working America.
The economy added just 151,000 jobs in August, with the jobs engine slowing significantly after revving up to 273,000 jobs in June and July. The average hours of work dropped to 34.3 hours per week in August, another sign of softening. Critically, annual wage growth slowed to 2.4 percent in August down from 2.6 percent in July, well below the peak performance of 3 to 4 percent we expect during a robust expansion. After declining significantly all the summer, the number of Americans who have dropped out of the labor market perked up again by 58,000 in August. As economist Justin Wolfers pointed out this morning, there is nothing inflationary in this report and the chances of an increase in the federal funds rate are basically nil at this point.
One month of a bad report should not take away from what has been a year of solid performance in the job market. Heck, for the last seventy-eight weeks, less than 300,000 workers per week have been laid off which is best streak since 1970. And while this month’s job gains were just enough to keep up with growth in the population, they were still better than what we saw at the beginning of the year: 118,000 jobs per month. The unemployment rate has now been at 5 percent or below for the last twelve months.
But even as the data indicate a healthy job market, Americans are not yet buying the news of the jobs recovery. Only 39 percent of Americans think it is a good time to find a quality job compared to 48 percent before the start of the last recession.
This Labor Day, It’s All About the Paycheck
American’s attitudes will only change if the recovery reaches workers’ paychecks. But so far, wage growth has been uneven. Figure 1 plots real wage growth (above inflation) since 2010, when the recovery officially started. The modest real wage gains since then have not been shared equally across the economy. Just looking at those sectors of the economy that pay wages amounting to less than $750 per week, real wages are just 2 percent higher than their 2010 level—and working families can’t help but feel good jobs are elusive in the face of that kind of stagnation. But the increase in those low-wage industries now appears to have some life, and it will be a vital indicator in the months and weeks ahead.
Figure 2 (below) provides a closer look at the wage growth phenomenon, again with the end of the recovery as a starting point. Pay in higher wage sectors like mining, finance, and construction started taking off in 2013. On the other hand, wages in leisure and retail jobs lagged only creeping back to their 2010 level by late 2014. Pay in these parts of the economy have finally showed signs of life, buoyed by increases to the minimum wage in many states, increasing demand for workers and prompting big voluntary announcements by companies like Walmart to boost worker pay. A continued upward trend in the wages of these front-line jobs would be the kind of economic recovery working families have been eagerly waiting for.
The Underemployment Problem
The problem now is not unemployment, it’s underemployment. Today’s report showed that that the number of underemployed workers involuntary stuck in part-time jobs ticked back up to 6 million in August. This is the second consecutive month in which this has happened—after the part-time count had dropped to its lowest level since last October in June (5.8 million).
The problem now is not unemployment, it’s underemployment.
Figure 3 (below) illustrates the difficulty of fighting underemployment with its ratio of the number of unemployed to underemployed, defined as those who are working part-time but want full-time hours; the figure also includes a polynomial trend line. This rate is currently at its lowest since 1989 and has been declining more steeply than ever before as more Americans exit unemployment into sub-standard jobs. Not only are jobs providing less hours, but a recent study found that schedules are less predictable than they were before the recession—adding to worker anxiety. The data underscore the need for better laws to promote predictable schedules.
It’s not just the the number of hours. Take the oddly named administrative, waste management, and remediation services—which would be more aptly named the “outsourcing sector” of all the kinds of services (janitors, security guards, call centers) that big companies have contracted out the workplace has increasingly fissured in recent years. Wages in this sector are still woeful, averaging just $580.85 per week in 2016. The growth in this future of work powerhouse (jobs have grown by 95 percent over the last twenty-five years) is just one indicator of the growth of contingent work.
Labor Day
This Labor Day is filled with less anxiety for many workers than in previous years, who have enjoyed steady employment and slowly rising wages. But, the fruits of the economic recovery have still failed to reach millions of working families who are ready to contribute more to the economy, and require more action and attention by policy makers.
Tags: jobs report
Labor Day Weekend Starts on a Downer, Amid Glimmers of Paycheck Hope
Today’s Labor Department report starts the Labor Day weekend on a downbeat as we pause to think about the state of working America.
The economy added just 151,000 jobs in August, with the jobs engine slowing significantly after revving up to 273,000 jobs in June and July. The average hours of work dropped to 34.3 hours per week in August, another sign of softening. Critically, annual wage growth slowed to 2.4 percent in August down from 2.6 percent in July, well below the peak performance of 3 to 4 percent we expect during a robust expansion. After declining significantly all the summer, the number of Americans who have dropped out of the labor market perked up again by 58,000 in August. As economist Justin Wolfers pointed out this morning, there is nothing inflationary in this report and the chances of an increase in the federal funds rate are basically nil at this point.
One month of a bad report should not take away from what has been a year of solid performance in the job market. Heck, for the last seventy-eight weeks, less than 300,000 workers per week have been laid off which is best streak since 1970. And while this month’s job gains were just enough to keep up with growth in the population, they were still better than what we saw at the beginning of the year: 118,000 jobs per month. The unemployment rate has now been at 5 percent or below for the last twelve months.
But even as the data indicate a healthy job market, Americans are not yet buying the news of the jobs recovery. Only 39 percent of Americans think it is a good time to find a quality job compared to 48 percent before the start of the last recession.
This Labor Day, It’s All About the Paycheck
American’s attitudes will only change if the recovery reaches workers’ paychecks. But so far, wage growth has been uneven. Figure 1 plots real wage growth (above inflation) since 2010, when the recovery officially started. The modest real wage gains since then have not been shared equally across the economy. Just looking at those sectors of the economy that pay wages amounting to less than $750 per week, real wages are just 2 percent higher than their 2010 level—and working families can’t help but feel good jobs are elusive in the face of that kind of stagnation. But the increase in those low-wage industries now appears to have some life, and it will be a vital indicator in the months and weeks ahead.
Figure 2 (below) provides a closer look at the wage growth phenomenon, again with the end of the recovery as a starting point. Pay in higher wage sectors like mining, finance, and construction started taking off in 2013. On the other hand, wages in leisure and retail jobs lagged only creeping back to their 2010 level by late 2014. Pay in these parts of the economy have finally showed signs of life, buoyed by increases to the minimum wage in many states, increasing demand for workers and prompting big voluntary announcements by companies like Walmart to boost worker pay. A continued upward trend in the wages of these front-line jobs would be the kind of economic recovery working families have been eagerly waiting for.
The Underemployment Problem
The problem now is not unemployment, it’s underemployment. Today’s report showed that that the number of underemployed workers involuntary stuck in part-time jobs ticked back up to 6 million in August. This is the second consecutive month in which this has happened—after the part-time count had dropped to its lowest level since last October in June (5.8 million).
Figure 3 (below) illustrates the difficulty of fighting underemployment with its ratio of the number of unemployed to underemployed, defined as those who are working part-time but want full-time hours; the figure also includes a polynomial trend line. This rate is currently at its lowest since 1989 and has been declining more steeply than ever before as more Americans exit unemployment into sub-standard jobs. Not only are jobs providing less hours, but a recent study found that schedules are less predictable than they were before the recession—adding to worker anxiety. The data underscore the need for better laws to promote predictable schedules.
It’s not just the the number of hours. Take the oddly named administrative, waste management, and remediation services—which would be more aptly named the “outsourcing sector” of all the kinds of services (janitors, security guards, call centers) that big companies have contracted out the workplace has increasingly fissured in recent years. Wages in this sector are still woeful, averaging just $580.85 per week in 2016. The growth in this future of work powerhouse (jobs have grown by 95 percent over the last twenty-five years) is just one indicator of the growth of contingent work.
Labor Day
This Labor Day is filled with less anxiety for many workers than in previous years, who have enjoyed steady employment and slowly rising wages. But, the fruits of the economic recovery have still failed to reach millions of working families who are ready to contribute more to the economy, and require more action and attention by policy makers.
Tags: jobs report