April Jobs Report: The Two-Tiered Recovery
Jill Schlesinger
CBS News Business Analyst, host "Jill on Money/MoneyWatch" pods, author of "The Great Money Reset"
The April jobs report continued the saga of a two-tiered labor market recovery. The economy added 160,000 jobs and the unemployment rate remained at 5 percent. Revisions to the previous two moths amounted to 19,000 fewer jobs than originally reported. With this report, total employment is now 5.4 million above the previous peak and up just over 14 million from the employment recession low.
But the broad numbers may not paint a true picture of the employment landscape. The biggest complaint is that overall wage growth has been unimpressive. In April, average hourly wages increased by 0.3 percent, nudging up the annual increase to 2.5 percent. Given the impressive number of jobs added, most analysts have been promising that wage growth would soon follow, but annual wage growth has remained between 2 and 2.5 percent for the past few years, below the near-3 percent seen in previous expansions.
It’s not supposed to work this way. If employers are having a hard time filling positions, and workers are more willing to jump ship, wages should be rising faster. However, according to economist Joel Naroff, “No matter how tight the market may be, companies are still willing to go without new hires and limit pay increases.”
It may be that the labor market is not quite as healthy as the top line measures indicate. In addition to the 2.1 million Americans who have been out of work for more than six months, the number of workers who work part-time but would rather be full-time remains at a still-elevated 6 million. According to research from the Federal Reserve Bank of Chicago, the high numbers of “part-time for economic reasons” is a contributing factor to limiting wage growth.
Steve Murphy of Capital Economics also notes that there has been a surge of low paying jobs in sectors like retail and leisure, while “at the same time, employment in higher-paid sectors such as manufacturing and mining has fallen back sharply. More generally, there has been a sharp deterioration in the quality of jobs created.”
Career coach Connie Thanasoulis-Cerrachio, co-founder of SixFigureStart? says her on-the-ground-interaction with employers and candidates echoes that sentiment: “We see a tale of two [labor] markets – strong candidates have a great market. Mediocre ones are still have a hard time.” What makes a strong candidate? It helps if those seeking jobs are looking in the hot industries that are hiring, like technology, healthcare, accounting, marketing/data analytics as well as the non-profit world, which Thanasoulis-Cerrachio says is “booming”.
What appears to be happening is that workers in the high growth fields can demand higher wages, but the vast majority of workers either don’t feel like they have bargaining power or have made a different kind of adjustment: if the boss can’t pay me more, maybe I will work a little less. This could be part of the reason why worker productivity has dropped off. According to the Labor Department, in the recent 2007-2015 period, annual labor productivity has slowed significantly to 1.2 percent, the worst period since the late-1970s to mid-1980s. Naroff says the downshift is understandable because “until workers have reasons to work harder (i.e., greater compensation), they will find ways not to work harder.”
Of course, with corporate earnings set to drop for a third consecutive quarter, companies are unwilling to take the first step to incentivize their workforces. This strange game of chicken is unlikely to continue for too much longer. Unfortunately, there is probably an equal probability that we see a downshift in the economy, which would spur workers to step it up; and an uptick, which would force companies to pay more.
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8 年www.pulsenight.com
AVP Default Servicing at PNC
8 年A lot of truth in this article.
Product Manager
8 年"It’s not supposed to work this way." Disappointed to see that many commentators continue to not acknowledge the severe disruption in the labor marketplace due to Obamacare. - Small employers reducing payrolls - More part-time workers - Lower pay for increased benefits cost These are all reflected in the jobs reports over the last several years. NO mystery there.
Independent Management Consultant
8 年Jill Schlesinger is one of the few observers to look at labor market performance from the time of the prior peak. She cites job growth from the January 2008 peak in the Payroll Series. There, she notes that total non-farm payroll jobs have increased by 5.483 million. And she is right on track citing the deep dichotomy in quality of jobs. In the first four months of 2016, BLS reports a total of 732,000 new private sector payroll jobs. But a look at job growth within occupational job classification reveals that only about 31% of these new jobs pay more in weekly earnings than the national payroll average which was $880.79 in April. Thus far in 2016, more than 37% of new jobs are either in Retail, which pays 62.7% of the national average, or Leisure & Hospitality, which pays just 43.9% of the average. This trend has been in place for a long time and wage analysis within occupational groupings shows the wage gaps are widening over time. Looking at the BLS Household Survey provides another interesting perspective. Since the prior peak in November 2007 (the Payroll and Household Series peaked at slightly different times), there has been a net increase of 20.03 million working-age adults, the pool of potential job holders, to the U.S. population. Over that time, there has been a net increase of 3.04 million Part Time jobs and 1.32 million Full Time jobs. That’s it. So for every 40 new adults who potentially could land a job, 6 found Part Time jobs, less than 3 landed a Full Time job, and 31 hit the couch. This fact helps highlight why employers have been relatively unwilling to grant wage increases ― because they know there is an army of available potential applicants who are not presently being utilized. Another reason why wage growth is substandard relative to previous economic recoveries is the slowdown in productivity that Schlesinger cites. Indeed, since the beginning of 2011, annual productivity has grown by only about 0.38% per year which compares unfavorably to an average annual growth rate in the post-War period up to 2008 of about 2.24%. But Schlesinger is wrong to blame this impact on workers not willing to work harder. She should look to the accumulating impact of non-value creating regulatory burden ― the regulatory burden under the Obama administration is far higher than in previous administrations as measured by the average economic impact of new rules. It should surprise nobody that job growth is tapering off, wages are growing slowly, and a large percentage of new jobs are in low-wage classifications. Economic growth in the past 3 quarters has averaged just 1.3% and it was 0.54% in Q1 of 2016. If this number stays put in subsequent revisions and the Atlanta Fed’s 1.7% Q2 forecast holds true, we’ll need to average a whopping 7.92% in Q3 and Q4 to reach the CBO’s 2016 forecast of an annualized 2.67% real GDP growth for 2016. Does anyone really think that’s going to happen? It would also mean that Q2 would be the sixth quarter in the past 7 where the growth in Personal Consumption Expenditures exceeded the top-line growth in GDP. Nothing remotely close to this has ever happened before in U.S. history (only 32% of quarters from 1947 to 2014 has seen PCE growth exceed GDP growth). When consumer spending accounts for more that 100% of GDP growth over an extended period, it means that the entire balance of the value-creating economy is in contraction. Even if Q3 and Q4 real GDP both come in at 4% annualized growth, a hugely unlikely outcome, we’ll only get an annualized 2.2% growth for 2016. This will leave intact the real legacy of the Obama economy ― not one single year where real GDP even reached 2.5% per year. That takes some real doing.