A Different Kind of Job Crisis

Jobs, Jobs, Jobs—recent data suggests that we are starting to see an uptick in hiring; Moreover, the unemployment rate is starting to fall.  This seems enough progress for some to declare a happy road ahead—which means that we should rest easy and stop talking about the need for structural changes in the way our economy is organized.

Before jumping on that bandwagon we need to remember that growth in employment was bound to happen sooner or later.  After all, we are in an officially declared period of economic expansion (which started in June 2009).  At issue is the quality of the expansion.  You know you have a serious problem when the expansion—a period when times are supposed to be good—is hard to tell from a recession.

In fact, we have a long way to go to replace the jobs lost during our last recession (which officially began in December 2007).  The chart below shows how many months it takes after the start of a recession to regain the absolute number of jobs that existed before the start of the recession.  Two things jump out: first, it is taking longer and longer for the economy to regain its lost jobs, which suggests that underlying economic processes are growing increasingly problematic for working people.  And second, the current recovery is in uncharted territory.  It may well be that we will fall into another recession before we ever get back to the number of jobs we had before our last recession began.  That possibility grows ever more likely as we slash state and local government spending.


However, there is another issue worth highlighting: the quality of the jobs being created.  Bloomberg BusinessWeek discussed this issue, reporting:

While the unemployment rate dropped to 9 percent in January [2011], from a two-decade peak of 10.1 percent in October 2009, many of the jobs people are now taking don’t match the pay, the hours, or the benefits of the 8.75 million positions that vanished in the recession, according to Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

This may restrain wage and salary growth, limiting gains in consumer spending, which accounts for 70 percent of the U.S. economy. The good jobs that would trigger a solid boost in spending just don’t seem to be there. “In the last recovery we were adding management jobs at this point, and this time it’s disappointing,” says Ashworth, who published a report on Jan. 27 about pre- and post-slump employment based on U.S. Labor Dept. data. “The very best jobs, we’re still losing those.”

Projections from the Bureau of Labor Statistics reinforce his pessimism. While the number of openings for food preparation and serving workers will grow by 394,000 in the decade ending in 2018, the average wage is only $16,430 including tips, based on 2008 data. Meanwhile, the number of posts for financial examiners, who work at financial-services firms to ensure regulatory compliance, will expand by just 11,100. The average pay for examiners is $70,930.

Lowe’s, the second-largest U.S. home improvement retailer, typifies the reshuffling of the U.S. workforce. The chain, based in Mooresville, N.C., said on Jan. 25 it is eliminating 1,700 managers responsible for store operations, sales, and administration as profit growth trails that of the larger Home Depot (HD) chain. Meanwhile, Lowe’s said it will add 8,000 to 10,000 weekend sales positions and is creating a new assistant store manager position.

The trend is troubling for the country’s long-term prospects, says Edmund Phelps, who won the Nobel Prize for economics in 2006 and directs the Center on Capitalism and Society at Columbia University in New York. Businesses aren’t innovating as much, so companies “just don’t seem to require all those relatively high-paid workers they once did,” he says.

The health-care industry is one example, the BLS said in a December report on the occupational outlook. As costs continue to rise, “tasks that were previously performed by doctors, nurses, dentists, or other health-care professionals increasingly are being performed by physician assistants, medical assistants, dental hygienists, and physical therapist aides.”

Michael Greenstone, a former staff member for the White House Council of Economic Advisers, says it’s “premature to make too much of where the particular job creation is occurring,” because the “immediate issue is that there are too many people” out of work. “I’m not in favor of ditch-digging, but the first thing is to get more people employed,” says Greenstone, an economics professor at the Massachusetts Institute of Technology. “Unemployment is a scourge of society right now, and it has to be the front-and-center issue.”

Job hunters are adapting, with 60 percent prepared to settle for a full-time position they don’t really want or one they’re not qualified for, says Dennis Jacobe, chief economist for Washington-based Gallup, based on a survey he conducted last month.

Ken Niswonger, 51, a machine builder by training, spent five months looking for work after losing his job in October 2009. Unable to find anything in his field, he enrolled in a college computer security program to learn new skills. “I’m hoping I can find something entry-level,” he says, adding that he’ll have to begin his search for an information technology job before he finishes his program. “I’m well aware I might not get what I used to make,” he says. “Who knows? Might get a job at $12 to $14 an hour. That’s not even $30,000 a year.”

Said differently, economic expansion or not, things are far from fine.


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