The Economist: A Fresh Look at Employment Growth
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National employment growth once again topped the 200,000 level in July, putting together the longest string of monthly gains of that magnitude since the late 1990s. The latest US Bureau of Labor Statistics data shows an increase of 209,000, bringing the total US job gain over the past 12 months to almost 2.3 million. While the unemployment rate ticked up very slightly to 6.2% because there were more new entrants into the workforce than jobs added, there has been notable improvement over the past year. We are finally well over the prior peak back in January 2008, and the job situation is showing signs of lasting and sustainable improvement. The numbers of people losing their jobs has been trending downward, signaling stability. However, there are still some problem areas.
Of the 209,000 total increase, 198,000 of it came from the private sector. Jobs in goods-producing industries were up by 58,000, with particularly large jumps in construction (up 22,000) and motor vehicles and parts (up 14,600). Services industries added 140,000, with big gains in retail trade and ambulatory health care, among others. One category that stood out to me was the notable gain in architectural and engineering services (up 8,800 since last month and 60,400 over the past year), as those kinds of positions are often a precursor to construction projects and the associated economic stimulus.
Educational attainment is strongly correlated with being able to find a job. In July, 9.6% of people without a high school diploma were unemployed (about 978,000 individuals). Moreover, the rate was up from 9.1% just a month prior (though down from 10.7% in July 2013). For high school graduates, the rate was 6.1%, up slightly over the June estimate. The proportion of unemployed for those with some college or associate degrees stood at 5.3%, up slightly over the month. In fact, the only educational category with improvement in the unemployment rate over the month was for people with a bachelor’s degree or higher, which dropped from 3.3% in June to 3.1% last month.
Age is another factor in unemployment, with younger workers far more likely to be without a job. The highest of all rates is among men aged 16 to 19, with 22.0% out of work (and even higher rates of joblessness for those at the younger end of that spectrum). For young women 16-19, the rate is a little better (18.3%), but still high. The unemployment rate improves sharply for those in their early 20s as schooling is completed, and continues to trend downward for those in their mid-30s, 40s, and 50s before increasing slightly for the 55 and older category. The lowest rate of any age group is for men aged 45 to 54, with 3.8% unemployment.
Long-term unemployment has been a big problem through the recent recession and recovery, but things are finally showing some signs of improving in that area as well. Over the past year, the number of people unemployed for 27 weeks or longer dropped by more than a million (from 4.2 million to less than 3.2 million). Less than half of jobless individuals have been without work for 15 weeks or more, and the proportion is dropping. Long-term unemployment is particularly problematic not only because of the financial strain, but also because skill sets can begin to erode and further reduce the chance of ever finding work. Job security indicators are also on the rise.
One piece of data that isn’t as encouraging is that the average for hourly earnings was only up by a penny over the month, and average weekly wages rose a meager 35 cents (to $843.53). While better than a year ago, when the average earned per week was $824.57, progress is still frustratingly slow.
Perhaps the most disturbing statistics, however, are in the area of part-time work. A notable component of the US workforce (almost 19.7 million persons) chooses to work part time due to family obligations, school, partial retirement, or other reasons. However, more than 7.5 million Americans are stuck in part-time jobs “for economic reasons,” meaning they couldn’t find full-time work. This number is slowly falling, but still indicates too much slack in the system. If you look at various other measures of labor utilization, this slack becomes more apparent. The “U-6” rate is the usual unemployment rate, plus people who want and are available to work but aren’t actively looking, plus those employed part time for economic reasons. The U-6 rate stands at 12.2%. Again, it’s better than a year ago, but little ground has been gained over the past few months.
Overall, the job situation has clearly improved. It’s certainly good news that the economy continues to generate jobs at a rate of more than 200,000 per month, and some of the growth areas are particularly encouraging. However, there was a very long way to go from the depths of the recession, and there are still far too many people who are working less than they want to be. Even better news will be when some of the slack is absorbed and wages begin to rise. We will get there if current patterns persist, but the journey is still in progress.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.