Click to enlarge:

˜˜˜

>

Since tomorrow is the big NFP day, let’s take a look at some of the details of recent job creation, via today’s Bloomberg Briefing:

“Improved hiring conditions and a decline in jobless claims are encouraging signs the economy is slowly healing. While these gains in the labor market may be sustainable over time, the quality of jobs driving this improvement is weak and confined to low-paying areas of the economy. This indicates that growth will remain somewhat weak throughout 2012. It also partially explains the lower rate of productivity gains observed over the past year . . .

Even with the encouraging increase in hiring over the past six months, weak income gains and sluggish wage growth have been persistent features of the current economic expansion. The pace of income gains is well below that of the past two jobless recoveries and real average hourly earnings continue to decline.The strength of labor employment gains in the subsectors of leisure and hospitality, health care and social assistance, retail trade and temporary jobs, indicate a growing low-wage bias in the economy. This is due in part to excess labor market slack and indicative of broader structural issues in the labor market. Overall household spending remains historically weak and as the price of gasoline increases above $4 per gallon in coming days these factors taken together pose a risk to second quarter growth.

While roughly 41 percent of the jobs created since 2010 are in the aforementioned low-wage sectors, they only account for 29 percent of the total labor force. Factoring in public sector job losses, these four low-wage-paying subsectors account for a whopping 70 percent of all gains during the past six months.

These sectors only accounted for roughly 25 percent of the job losses during the recession, well below the gains during the recovery and significantly below those observed over the past six months. This points to a significant underutilization of labor resources in the current expansion and is one reason why Fed policy makers signaled they intend to remain accommodative over the next two years . . .”

Here is why:

“The ability to turn to cheap and productive labor outside the U.S., as well as the advanced skills demanded by many industries, has diminished the employment horizons for many workers. The unemployment rate among workers with two or more years of college – the cohort most likely to be caught in the squeeze between demand for advanced skilled labor and the outsourcing of many professional office and back office jobs – while declining to 7.3 percent in February from 8.9 percent in September 2010, is still well above the 3.3 percent pre-recession low observed in November 2007.

Interesting stuff

>

Source:
Labor Market Gains Increasingly Driven by Low-Wage Jobs
Joseph Brusuelas
Bloomberg BRIEF, April 5, 2012 www.bloombergbriefs.com

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

22 Responses to “US Labor Market: Increasingly Low-Wage Driven”

  1. Expat says:

    While we are on the subject of wage slaves, I thought I would mention Chalmers Johnson’s amazing trilogy on the American Empire: Blowback, The Sorrows of Empire, and Nemesis.
    They are amazing. I just read Nemesis on the way back home after two weeks in the American South and was tempted to either jump out of the plane or hijack it and fly it into the Pentagon (A big hello to the NSA, CIA and the DHS as Echelon and Carnivore pick up this message…only kidding guys, I would never jump out of an airplane and I don’t even know how to fly, let alone fly into a building).

  2. MorticiaA says:

    Couple of random thoughts come to mind:

    1. Skilled labor (defined as college-degreed workers) never experienced the nadir in employment stats that the rest of the labor force did. Couldn’t that partly account for the unbalance in those being hired now?
    2. There are areas of huge labor shortages – two very notable jobs are engineers and truck drivers. It takes time but eventually people will catch on and be trained or educated in areas where there are severe shortages.
    3. Call me naive but I expect a net gain of U.S. manufacturing jobs over the next several years as companies find here an ample supply of labor, relatively lower USD and rising labor costs in other countries.

  3. Jojo says:

    There are unintended (maybe better words would be unanticipated or unforeseen) consequences for every decision. Like the intellectual cavemen we still are, we poke at things to fix them without considering all the possibilities of that poking action

    So in exchange for the price of shipping many jobs overseas, exposing our technology to other countries, richer Congresspeople and dismantling the underpinnings of our middle class (if not destroying the whole future of our society), we received in return more profitable corporations, lower priced (but shoddier?) goods, higher CEO/executive compensation and happier shareholders.

    Was it a good trade? Short-term gain for long-term society destruction? I think not.

  4. george lomost says:

    This also belongs in the “Housing Recovery” theme you’ve been covering this week.

  5. normal1 says:

    This is why I cringe whenever I hear a politician promise more jobs. The key word being jobs, as in plural, which means we can look forward to working more for less.

  6. rhodope says:

    Would it be valuable to find government statistical data on taxable income and/or tax receipts? Consumers being 60%+ of the economy if the amount of money finding it’s way in to the pocket book is diminished then that feeds the vicious cycle of not being able to pay employees who then can’t buy stuff to fund other employees.

  7. Futuredome says:

    Consumers are less the economy they were 5 years ago. That is a fact.

    The key is whether investment will take up the slack . Low wage jobs are usually the first sign of recovery.

  8. farmera1 says:

    I agree shipping jobs, and shutting down companies in the US for cheaper labor has been a huge destroyer of wages/jobs in the US. But I think there is another huge (and mostly hidden) player here, one we really don’t hear much about and you can’t really blame on the hedgies and politicians.

    AUTOMATION: Don’t see much about this (computers, robots, controllers) but it is a huge player and will continue to destroy jobs at an ever increasing rate.

    First hand I have seen manufacturing plants in the US increase through put several 100% with robots and other automation and with no additional labor. Think auto industry and robots. Think pharma (yep), the amount of automation is staggering in pharma and I think we are only seeing the beginnings. Automation isn’t going away, and we are on the very leading edge of the proverbial hockey stick in job destruction.

    There is some kind of exponential growth in automation. We are just in the early stages of the impact. If there isn’t some kind of limits put on the automation, we are looking at a permanently unemployed/under employed sub class. Maybe some jobs will have to be set aside for humans….

    The rate of this change is what is catching everyone by surprise. A book written (sorry don’t have the name) in 2004 on this subject used driving as an example of something the computers couldn’t take over since it was too complex. Well Google has driven several 100,000 miles around the country with cars driven by computers.

    Hang on folks the revolution is about to start.

  9. willid3 says:

    i think automation in plants explains more why there is a lot less manufacturing jobs than there used to be. and even if they pull some plants back (or even all of them,) it wont matter much. the real problem is what is suppose to be be next? its not IT, they debased that too much. so that leave what? we have done this before. for the 100-200 years jobs were in agriculture (automation did those jobs in to). it took that many people to feed us. we replaced that slowly with manufacturing jobs. now they are going the same way. and we don’t seem to have a replacement.

  10. willid3 says:

    seems like not much has changed since 2001. other than the construction industry isn’t making up for the lack of any higher wage jobs. now those are gone for the next few years. even health care has offshoring threatening it.

  11. rjs0 says:

    not to worry…jamie dimon sees them all as pent up demand for housing…

  12. [...] Executives – WSJ Government Spending Cuts Will Create Economic Boom: Art Laffer – CNBC US Labor Market: Increasingly Low-Wage Driven – The Big Picture Not Enough Inflation – Krugman, NY Times The Fable of the Century [...]

  13. ashpelham2 says:

    ~Expat: Was it the visit to the American South that made you contemplate suicide? If so, I can sympathize..People like Rick Perry brag about job growth in his state, but I’ve never seen more fast food restaurants and Days Inn’s in any place like what Texas has. Even Media is becoming a low wage job occupation: here in Birmingham, all of the news affiliates are employing recent graduated minority hires, at fractional wages compared to those of years gone by. Banking, my profession, has been pushing down wages for years, in a place where wages have always been less.

    Had a discussion with a guy my age yesterday about how people in Alabama have a misunderstanding about what it means to pay “taxes”. They think because their property taxes are lower than INSERT OTHER STATE HERE, that this must be better. Then they get their eyes opened to the fact that 9% is the standard sales tax in most locales, and 10% is becoming more common. Our family probably spends $6,000 per year on groceries, at nearly 10% sales taxes uniformly applied. That’s $500.00 more in sales taxes than is collected in other states due to the fact that some places charge a lower sales tax on grocery items. Add that to what I currently pay in property taxes, and you are right back up there with what many other places pay.

    The misinformed: What makes America work.

  14. Expat says:

    Ashpelham2: Nah, I wasn’t in Texas, just Georgia and North Carolina. It was really Johnson’s books. His focus is the American empire abroad and the enormous military-intelligence structure that rules it. Most of what he says, I knew, but seeing it all together is overwhelming. CIA mercenaries, Pentagon torture camps, one thousand bases in 130 countries, NSA listening posts, and black budgets reaching the hundreds of billions every year.
    The dumbing down of America and the low-paying service jobs are either goals of this Black Cabal or welcomed side-effects.
    An interesting question he raises: what do we do with all the people employed by the military if we really reduce spending? While we have a million or so soldiers, we also have millions of civilians in the employ of the Pentagon. Every base is serviced by Halliburton (or their ilk). Every weapons system employs thousands. Peace dividend my ass.
    If we cut our military spending down to twice the level of our nearest competitor we would end up with two more million unemployed. Frankly, it would be cheaper to pay them all $50k a year to do nothing.

  15. rhodope says:

    Expat, Well said, I just wonder can we pay the future unemployed military to do something productive? Say High speed rail, Alternative energy research, Infrastructure maintenance/repair, “last mile” telecommunications upgrades, etc. .Why is it that we as a nation are not allocating resources at projects that create a durable return on investment or benefit…

  16. [...] Barry Ritholz reproduces the chart above and an explanation of the data from Bloomberg Briefing: The pace of income gains is well below that of the past two jobless recoveries and real average hourly earnings continue to decline.The strength of labor employment gains in the subsectors of leisure and hospitality, health care and social assistance, retail trade and temporary jobs, indicate a growing low-wage bias in the economy. This is due in part to excess labor market slack and indicative of broader structural issues in the labor market. . . [...]

  17. [...] bottom third of the skill distribution, a pattern that has persisted through the recovery from the 2007-2009 recession and that is expected to persist to [...]

  18. [...] paychecks is stubbornly still shrinking. According to Friday’s Bloomberg Briefing, “the pace of income gains is well below that of the past two jobless recoveries and real average hourly earnings continue to [...]

  19. [...] bottom third of the skill distribution, a pattern that has persisted through the recovery from the 2007-2009 recessionand that is expected to persist to [...]

  20. [...] A Bloomberg Briefing that took place on Friday, 4/13, indicated that close to 70% of the new jobs created in the past 6 months “were concentrated in restaurants and hotels, health care and home health care, retail trade, and temporary employment agencies. These four sectors employ just 29 percent of the country’s workforce but account for the vast majority of the jobs being created. These lower paying jobs account for an hourly earnings decrease. Formerly middle-class jobs have quickly disappeared leaving only lower-wage jobs available” (See the Washington Post article. See also The Big Picture synopsis). [...]

  21. [...] US Labor Market: Increasingly Low-Wage Driven – The Big Picture [...]

  22. [...] paychecks is stubbornly still shrinking. According to [April 5th's] Bloomberg Economics Brief, “the pace of income gains is well below that of the past two jobless recoveries and real average hourly earnings continue to [...]