Sunday, September 8, 2013

"Where Have All the Good Jobs Gone?"

Last Friday, the U.S. Bureau of Bureau of Labor Statistics said 169,000 jobs were added during August (economists expected 180,000), with growth primarily in part-time and lower paying jobs. In addition, the unemployment rate fell to 7.3%, down from 7.4% in July, with the decline mostly a result of 312,000 people dropping out of the workforce. Notably, the labor-force participation rate declined to 63.2%, the lowest since August 1978. (This rate measures Americans employed or looking for work).

After these results, the following comments from “Where have all the good jobs gone?”, a July 2012 report from the Center for Economic and Policy Research, are worth considering:
  • “The U.S. workforce is substantially older and better educated than it was at the end of the 1970s … we would have expected the share of good jobs to have increased in line with improvements in quality of the workforce. Instead, the share of good jobs in the U.S. economy has actually fallen… at every age level, workers with four years or more of college are actually less likely to have a good job now than three decades ago. This development is even more surprising because the economy also has almost twice as many workers with advanced degrees today as it did in 1979.
  • We believe that the decline in the economy’s ability to create good jobs is related to deterioration in the bargaining power of workers, especially those at the middle and the bottom of the income scale. The main cause of the loss of bargaining power is the large-scale restructuring of the labor market that began at the end of the 1970s and continues to the present.
  • The share of private-sector workers who are unionized has fallen…
  • Many jobs in state and local government have been privatized and outsourced.
  • Trade policy has put low- and middle-wage workers in the United States in direct competition with typically much lower-wage workers in the rest of the world.
  • A dysfunctional immigration system has left a growing share of our immigrant population at the mercy of their employers, while increasing competitive pressures on low-wage workers born in the United States.”

As the U.S. economy continues to heal (although in an uneven fashion), Friday’s employment report suggests that challenges remain. The observations from the Center for Economic Research should be included along with other factors contributing to a potential long-term structural change. Based on the weakness of the jobs report, speculation about a continuation of the U.S. Federal Reserve's stimulus efforts may increase. Expect more market swings.

U.S. Labor Participation Rate

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