The Very Worst Part of Today's Lousy Jobs Report
New reports from the U.S. Bureau of Labor Statistics and Bureau of Economic Analysis confirm that America's economy is still struggling to grow. If the trends of the past three years persist the U.S. will experience at least a lost decade.
Only 162,000 jobs were added in June, compared to an expected gain of 185,000. According to a persuasive analysis from the Federal Reserve Bank of Chicago, at that pace it would take another five years to return to full employment. This estimate includes aggressive assumptions about aging, immigration and the birthrate that make the "employment gap" smaller than many others believe.
The return to full employment could take even longer if those assumptions are wrong, or if growth slows down sometime over the next five years. (To be fair, the average annual rate of job growth has been closer to about 180,000, which implies a return to full employment in 2017 rather than 2018.)
The BLS report also tells us what kinds of jobs were added. Here again, the news is not particularly encouraging. More than half of the jobs added last month were either in retail trade or "food services and drinking places." People employed in those sectors tend to have much shorter work weeks and much lower hourly wages than everyone else.
Even worse, a recent paper by Canadian researchers suggests that many of the people taking these jobs are relatively over-educated. The authors argue that, since 2000, globalization and technological advancement have reduced the demand for "high-skilled" workers. Desperate for employment, these workers ended up pushing the "lower-skilled" out of the job market entirely. This may help explain why the share of people aged 25 to 54 counted as being in the labor force has plunged by 3.5 percentage points since 2000.
The quality of jobs being created is probably connected to the depressing performance of incomes and the decline in the work week. Hourly pay has grown by just 1.9 percent over the past 12 months -- basically unchanged since the end of 2009. The data from the BEA tell a similar story. Real after-tax incomes fell in June. Americans still have less purchasing power than they did in November 2012. Our standard of living has barely improved over the past year.
It's too bad that policymakers aren't concerned enough about these trends to try doing anything different.
(Matthew C. Klein is a writer for Bloomberg View. Follow him on Twitter.)