South By North Strategies, Ltd.

Bad Jobs During Bad Times

In a post at Policy Shop, Paul Osterman of MIT that the high proportion of poor quality jobs in the American economy is a problem as severe as unemployment.

The second jobs crisis is more subtle but no less serious. Far too many jobs fall below the standard that most Americans would consider decent work. Last year 19.7 percent of working adults held jobs that would put a family of four below the poverty line even if they worked full time and full year. These people work in factories and hotels, in restaurants and hospitals, on construction sites and in day care centers. The problem spans all races and ethnic groups and includes large numbers of native born Americans as well as immigrants.
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Why are there so many bad jobs? The key explanation is that working Americans have not shared in benefits of economic growth. In 2000 the median wage of adult workers was (in 2010 dollars) $17.41 and by 2010 it had barely grown to $17.60. During this same period the annual increase of productivity was over 2.5 percent. Who benefited from this growth? Between 1993 and 2008 the top 1 percent captured 52 percent of all new income in the economy. This is not just a story about dividends and stocks: the share of earnings captured by the top 1 percent nearly doubled.

Quelle Surprise!

Yves Smith of Naked Capitalism pays attention and states the obvious while wondering while it isn’t so obvious to many.

I’m a bit surprised that anyone can be surprised by the lousy jobs numbers for August. Consumers are worried and too many economists have been trying to draw trend lines through noise in retail spending data and call it proof that a recovery in under way. Broad measures of unemployment are stuck in the upper teens, big companies are continuing to shed jobs, small businesses on the whole are pessimistic, state budgets are under pressure and federal deficit spending is set to be reined in. With housing in most markets not having bottomed, the overwhelming majority of consumers having taking a wealth hit, businesses not investing and government not taking up the slack, where exactly is growth supposed to come from? The tooth fairy?
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But why has the media been so clueless? Cynics might argue that they are paid to be clueless, and there is more than a bit of truth in that. However, I suspect at least as powerful is that the overwhelming majority of reporters live in New York or Washington DC, two cities relatively unaffected by the downturn. DC is awash in lobbyist dollars and New York has been kept afloat by super low interest rates and other sops to the banks.

Editor’s Note

Policy Points is taking a few days off to celebrate the Labor Day holiday. Normal posting will resume on Tuesday, September 6, 2011.

Thank you for your interest in the blog.

Around The Dial – September 2, 2011

Economic policy reports, blog postings, and media stories of interest:

• Policy Shop points out the importance of unemployment insurance.
• Jonathan Chait notes the 1997 Balanced Budget Act was a bit of a scam.
• Off the Charts points out the importance of food stamps.
• Economix notes the “shrinking payoff’ to college graduates.
• Jared Bernstein graphs the recession and Recovery Act.

Zero Job Growth Posted In August

CHAPEL HILL (September 2, 2011) – In August, the American economy added no more payroll jobs than it lost. While the private sector netted 17,000 positions, the public sector shed 17,000 jobs, resulting in a net gain of zero jobs. Also in August, 9.1 percent of the labor force was unemployed, while the underemployment rate ticked up to 16.2 percent. These findings come from today’s national employment report.

“The August employment report shows that the national labor market has stalled,” said John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “Job growth was nonexistent and joblessness remained widespread, as 25.4 million Americans reported being unemployed or underemployed.”

In August, the nation’s employers added no more payroll positions than they cut. A net loss of 17,000 public-sector jobs canceled out a meager gain of 17,000 private-sector jobs. Local government reductions (-20,000, linked primarily to a loss of 13,700 positions in local government education) drove the public-sector decline. In recent months, public-sector cuts have weighed down job growth. Since August 2010, government payrolls have fallen by 450,000 positions with this contraction offsetting 26.3 percent of the private-sector job growth that occurred during the same period.

Furthermore, the payroll employment estimates for June and July underwent downward revisions. With the changes, the economy netted 105,000 jobs over those two months, not 163,000 positions as previously reported.

Several private industries recorded job growth in August. Education and health services added the most positions, (+34,000), followed by professional and business services (+28,000). Information lost the most positions (-48,000), though the number is influenced by the fallout from a large, temporary strike by employees of Verizon Communications. Employment levels in most other major industries were unchanged in August.

“The August employment report is another entry in a series of increasingly weak reports,” noted Quinterno. “Over the past three months, net job growth has averaged just 35,000 positions. The American jobs machine clearly is malfunctioning.”

The inability of the current pace of job growth to alter employment conditions was evident in the August household survey. Last month, 14 million Americans (9.1 percent of the labor force) were jobless and seeking work. While the unemployment rate and number of unemployed individuals dropped over the past year, the share of the population with a job remained depressed. In August, the share of the adult population that was employed (58.2 percent) remained at a level last seen in the early 1980s.

Another cause for concern is the fact that long-term unemployment remains elevated. Last month, 42.9 percent of all unemployed workers had been out of work for at least 27 weeks. A year ago, the comparable figure was 42.2 percent.

In August, proportionally more adult male workers were unemployed than female ones (8.9 percent vs. 8 percent). Similarly, unemployment rates were higher among Black (16.7 percent) and Hispanic workers (11.3 percent) than among White ones (8 percent). The unemployment rate among teenagers was 25.4 percent. Between July and August, unemployment rates for most every major demographic exhibited little change.

Additionally, 7.7 percent of all veterans were unemployed in August. The unemployment rate among recent veterans (served after September 2001) was 9.8 percent.

“Jobs remained scarce in August,” added Quinterno. “This led many individuals simply to abandon their job searches. Compared to a year ago, America has a smaller labor force and more individuals who report being only marginally attached to the labor force.”

A more extensive measure of labor underutilization is the underemployment rate, which equaled 16.2 percent in August. Further evidence of the difficulty in finding a job is that, among unemployed workers, the average time out of work rose in August equaled 40.3 weeks. A year ago, the comparable figure was 33.5 weeks.

“The American economy did not create jobs in August, nor has it managed to create many jobs at all over the past several months. Conditions are not improving, yet policymakers remain strangely passive,” observed Quinterno. “Nothing suggests that a wait-and-see approach will produce outcomes different from those we are seeing.”