Jobs Are Back, But Is It Too Soon to Celebrate?
The jobs report from the Bureau of Labor Statistics (BLS) revealed a gain of 217,000 jobs in May. It was the fourth consecutive month with an increase of at least 200,000 jobs — the first such stretch since early 2000 — and pushed total nonfarm employment to a record 138.46 million, surpassing the previous high set in January 2008 at the dawn of the Great Recession. After 77 months, the longest recovery of any post-World War II recession, the lost jobs are back.1
Or are they? A closer look at a broad range of employment indicators suggests that the economy still falls short on the jobs front. And the long-term employment picture might never be the same as it was before the recession. Here are some factors to consider regarding current employment trends and how they may affect the economy.
Behind the Numbers
The fact that the total number of jobs has returned to the pre-recession high does not mean employment is as healthy as it once was. The U.S. population has grown over the 77-month period — one reason why the May unemployment rate was 6.3%, compared with 5.0% in January 2008. Moreover, the unemployment rate, which reflects people who have looked for work in the previous four weeks, does not capture those who have stopped looking but still want to work and those who work part-time because they can’t find a full-time job. A broader measure of unemployment that includes these categories stood at 12.2% in May; this is down from a high of 17.2% in 2010 but still much higher than the 8% to 8.5% range before the recession.2
Another key measure, the labor force participation rate, has dropped steadily throughout the recession and recovery — from 66.2% in January 2008 to 62.8% in May 2014, the lowest point since the late 1970s.3Retiring baby boomers are driving this trend and should continue to do so for another 15 years or more. In 2013, about 76% of those leaving the workforce were people aged 55 and older who indicated they did not want a job.4
Jobs vs. Good Jobs
One study found that about 44% of jobs created since February 2010 have been in low-wage industries paying $9.48 to $13.33 per hour. (In most states, minimum-wage jobs currently pay much less.) On the other hand, 78% of jobs lost from January 2008 to February 2010 were in mid- and higher-wage industries.5–6 Clearly, job creation alone will not be enough to put the economy back on track in the long term. What’s needed are jobs that pay enough to enable workers to spend on levels that may stimulate further economic activity.
The Obama administration has proposed raising the federal minimum wage to $10.10 per hour, and some states have already set future increases to a similar level.7 But a higher minimum wage does not address the larger issue of what economists call “job polarization,” a shift toward an imbalanced employment market in which jobs are easier to find at the lower and higher ends of the wage spectrum.8
The prime force behind polarization is automation, not only in the manufacturing sector but across a broad range of industries and occupations, including sales and office administration. (Offshoring and outsourcing have also played a role.)
Many middle-wage workers perform physical or cognitive “routine tasks” that can be automated, whereas low-wage and high-wage workers tend to perform less routine physical or cognitive tasks, respectively. Polarization began before the recession, but the downturn exacerbated the trend as companies maintained or increased productivity with reduced workforces.9
Despite having large cash reserves, businesses have been slow to hire and invest in this environment. A number of signs suggest a gradual, if cautious, change. A second-quarter 2014 survey found that 43% of CEOs expect to hire over the next six months, up from 37% in the first quarter.10 In another survey, 61% of corporate economists said their companies plan to increase capital spending over the next year.11
Official statistics also point to more opportunities for job seekers. There were 4.5 million open positions at the end of April, the highest since September 2007, and jobs are taking longer to fill than at any time since the BLS began tracking such data in 2000.12–13 Whether this forces employers to raise wages in order to attract top candidates remains to be seen. Some employers indicate that candidates with the necessary skills and experience are not available, which suggests that more focused training programs may be required.
For now, it seems clear that even though the employment picture is improving, there are still roadblocks that could restrain broader economic growth and prevent willing workers from obtaining good-paying jobs. The next year or so may be critical in determining whether the job market will continue to recover on a level that finally pushes the U.S. economy onto the fast track.
1–3, 12) U.S. Bureau of Labor Statistics, 2014
4) USA Today, January 12, 2014
5) CNNMoney, April 28, 2014
6–7) National Conference of State Legislatures, 2014
8–9) Federal Reserve Bank of St. Louis, 2013
10) Business Roundtable, 2014
11) USA Today, April 21, 2014
13) Bloomberg Businessweek, June 12, 2014
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