Reports from the Economic Front

a blog by Marty Hart-Landsberg

The Deteriorating Labor Market

Despite the declining rate of unemployment—-it fell to 7.4% in July, the lowest level since December 2008—it is clear that economic trends, especially the rate and nature of job creation, are far from desirable.

As the Wall Street Journal explains:

The U.S. labor market’s long, slow recovery slowed further in July—and many of the jobs that were created were in low-wage industries.

Employers added a seasonally adjusted 162,000 jobs in July, the fewest since March, the Labor Department said Friday, and hiring was also weaker in May and June than initially reported. Moreover, more than half the job gains were in the restaurant and retail sectors, both of which pay well under $20 an hour on average. . . .

The falling jobless rate reflects to some degree a pace of hiring that, though slow, has remained steady over the past year even as the broader economy has grown in fits and starts. The U.S. has added an average of 192,000 nonfarm jobs per month so far this year, hardly a robust pace but more than enough to keep up with population growth.

But the drop in the unemployment rate is also the result of a job market that remains too weak to draw back workers who have dropped out of the labor force. Some 6.6 million workers say they want a job but don’t count as unemployed because they aren’t actively looking, a number that has barely budged in the past year. The number of Americans working or looking for work fell by 37,000 in July; as a share of the population, the labor force remains near a three-decade low. . . .

President Barack Obama has stressed the need for good jobs, including during a visit this past week to an Amazon.com Inc. facility in Chattanooga, Tenn., where he called for “a better bargain for the middle class.”

The day before the president’s visit, the Internet retail giant said it was adding more than 5,000 full-time jobs in its distribution centers across the country. Many of the jobs pay $11 an hour or less, although the company said workers will qualify for health insurance and other benefits, including stock grants and tuition subsidies.

“In our viewpoint these are great jobs,” Amazon spokeswoman Kelly Cheeseman said.

But the proliferation of low-wage jobs is leading to anemic growth in incomes. Average hourly wages were up by less than 2% in July from a year earlier, continuing a pattern of weak wage growth in the recovery. A broader measure of income released by the Commerce Department on Friday showed that inflation-adjusted incomes actually fell slightly in June.

The following chart, from a Washington Post article, helps highlight the problematic nature of U.S. job growth. By far the greatest number of jobs lost during the recession were mid-wage jobs.  And by far the greatest number of jobs created during the recovery have been low-wage jobs.

job losses gains

Even worse, almost all the jobs created over the last six months have been part-time.  According to a McClatchy report:

The unemployment rate is measured by the separate Household Survey, and it fell two-tenths of a percentage point to 7.4 percent, its lowest level since December 2008. That’s due in part to slow growth in the labor force. The jobless rate is based on a sample of self-reporting from ordinary people across the nation, and it’s the Labor Department measure that shows a very troubling trend in hiring.

“Over the last six months, of the net job creation, 97 percent of that is part-time work,” said Keith Hall, a senior researcher at George Mason University’s Mercatus Center. “That is really remarkable.”

Hall is no ordinary academic. He ran the Bureau of Labor Statistics, the agency that puts out the monthly jobs report, from 2008 to 2012. Over the past six months, he said, the Household Survey shows 963,000 more people reporting that they were employed, and 936,000 of them reported they’re in part-time jobs.

“That is a really high number for a six-month period,” Hall said. “I’m not sure that has ever happened over six months before.”

No wonder workers are struggling to make ends meet—job creation is weak and most of the jobs being created are low paying and part time.  But it is not like corporations don’t care.  For example, McDonald’s Corporation teamed with Visa to offer its workers a helping hand: a web page with advice about how to budget better.  This must be a great help to workers that earn on average about $8.25 an hour.

The McDonald’s working budget, shown below, is a bit hard to interpret.  What is clear however is that the company expects workers to have two jobs, pay $20 a month for health care, nothing for heat, $600 a month for rent, and . . .

For insight into what it is like to live on a McDonald’s wage, check out the Bloomberg story on Tyree Johnson, a 20 year employee still making minimum wage.  Corporations like McDonalds don’t pay these low wages because they are hurting but rather because they help their bottom line, as the following graphic from the Bloomberg story shows.

Corporate apologists often argue that these jobs are just “starter” jobs for high school students seeking to earn money for some extra like a smart phone.  But as the New York Times notes, only 14% of those earning between the minimum wage and $10 an hour are less than 20 years old.

As Steven Greenhouse reports, fast food and other low wage workers have begun organizing and striking to improve their working conditions; they are demanding a $15 hourly wage:

In recent weeks, workers from McDonald’s, Taco Bell and other fast-food restaurants — many of them part-time employees — have staged one-day walkouts in New York, Chicago, Detroit and Seattle to protest their earnings, typically just $150 to $350 a week, often too little to support themselves and their families. More walkouts are expected at fast-food restaurants in seven cities on Monday. Earlier this month hundreds of low-wage employees working for federal contractors in Washington walked out and picketed along Pennsylvania Avenue to urge President Obama to press their employers to raise wages.

These workers are taking real risks and if successful their gains would likely boost living and working conditions for most U.S. workers.  They deserve our strong support.

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