Three Reasons Not to Get Excited about the Latest Jobs Report
Three Reasons Not to Get Excited about the Latest Jobs Report
The economy added 195,000 jobs in June, and revisions to the May and April reports pulled the average for the last three months up to 196,000. All of this was reported with an audible sigh of relief, and the hope that—at long last—recovery might be taking hold. And now we hold our breath for the July report.
In the bigger picture, this monthly flurry of interest in the pace of job creation often obscures more than it reveals. Not only are the monthly numbers notoriously soft (witness the dramatic revision in June to the April and May numbers), but we tend to make too much of petty differences—whether new jobs outpaced those of the previous month or exceeded expectations. The only meaningful benchmark, of course, is where we are on the road to sustained and shared economic recovery. Taking the June jobs report as a milepost, we still have a long way to go. Here are three reasons why:
1) The Real Job Numbers
The number of “new” jobs is meaningless in the absence of the right target or benchmark. The labor force has grown: getting back to pre-recession levels of employment has little meaning after almost six years of immigration, retirements, and high school and college graduations. And participation in the labor force has fallen: new jobs are taken not just by the unemployed, but by those who dropped out of the labor force when things were really bad (this is why the unemployment rate stayed unchanged even as jobs were added in June). Our real jobs deficit is not the number of jobs we are short of the pre-recession peak. It is the number of jobs, given our current labor force, that we’d need to return to pre-recession rates of unemployment and labor force participation.
On this score, the outlook is bleak. At 196,000 jobs a month, according to Heidi Shierholz of the Economic Policy Institute, it will take us five years to get back to pre-recession unemployment rates. Using the employment-to-population ratio of prime age workers—a measure that avoids both variations in labor force participation and demographic outliers like those in college or near retirement—Shierholz estimates that four years of recovery have brought us “only about one-fifth of the way out of the hole left by the Great Recession.”
2) Good Jobs, Bad Jobs
The number of “new” jobs is also meaningless without any attention to the quality of those jobs. The pattern here is pretty stark: during the recession, as the National Employment Law Project has documented, jobs were lost across the economy. In the recovery to date, job gains have been concentrated in lower wage occupations.
We can see this pattern at work in the graphic below, which charts gains and losses in major sectors across the recession, the recovery, and the full business cycle. Recessionary losses are dramatic, and near universal. The recovery is meager by contrast, and concentrated in low-wage sectors like retail and hospitality (the spike in professional business services is misleading, as most of the job growth in this sector is in temp services—a subsector with average hourly earnings of only about $15). And losses have persisted, through the recovery, in sectors like construction, information, and state and local government.
In turn, job growth has not dampened the rate of underemployment. Indeed the number of workers who want a job but have given up looking, or who want to work full-time but have settled for part-time hours, both increased in June.
3) Full Employment and Shared Prosperity
All of this, in turn, undermines the prospects for full recovery and shared prosperity. The combination of unemployment, underemployment, and uneven job growth continues to dampen wages—which have fallen since 2007 for all but the highest earners. Workers can’t participate in the labor market to the extent they want to, or work the hours that they want to. The jobs we are creating are—on balance—of a lower quality than those we have lost. And wages within occupations are weakening.
This is why, across the first two years of recovery, the top 1 percent of households hoarded all of the income gains. Indeed, for the rest of us, “recovery” meant a net decline in pre-tax income. We can crow about the latest job numbers, but the sad fact remains that ordinary Americans have little prospect—now or in the near future—of rebuilding family incomes or family security.
Colin Gordon is a professor of history at the University of Iowa. He writes widely on the history of American public policy and is the author, most recently, of Growing Apart: A Political History of American Inequality, published by the Institute for Policy Studies at www.inequality.org
