U.S. Jobless Claims Low, but Labor Market Still in Turmoil
The U.S. Department of Labor released its latest weekly unemployment insurance claims data on March 26, 2015. Seasonally adjusted U.S. jobless claims fell again to 282,000, their lowest level since mid-February, and have been in decline since their peak level of 665,000 claims in March of 2009. Despite this, wages are stagnant and underemployment is rampant as the U.S. labor market fails to heal.
Chart courtesy of www.StockCharts.com
U.S. Jobless Claims Distorting Reality?
Moving beyond headline numbers is critical to understanding the misery facing many in the U.S. labor market. Total measures of labor market health, like the underemployment rate, labor force participation, and wage growth, aren’t as strong as you would suspect, given the historically low U.S. jobless claims.
For, example labor force participation has never been this dismal. It currently sits at the lowest level since 1978! (Source: Federal Reserve Bank of St. Louis web site, last accessed March 27, 2015.) This means fewer people are looking for work now than at any point in 37 years!
Some economists explain the low participation rate as a structural issue, with younger people staying at school longer and not working part-time, and the growing number of baby boomers leaving their desks. While this has some anecdotal merit, what is more concrete is the number of underemployed workers in the U.S.
The February jobs report released on March 6 revealed that 6.6 million Americans were employed part-time for economic reasons—they just couldn’t find full-time work. Another 2.2 million Americans were marginally attached to the labor force, meaning they looked for work at some point in the last year. (Source: Bureau of Labor Statistics, March 6, 2015.)
But there’s another problem that gets very little attention…
U.S. Wage Scrutiny
We are told that since the Great Recession ended, many jobs have been added to the U.S. economy. The Bureau of Labor Statistics (BLS) confirms this too. The U.S. unemployment rate declined from 10% in 2010 to just 5.5% in February. Impressive!
Sadly, no one has questioned what kinds of jobs were created. The reality is that more jobs are being created in low-wage-paying sectors, while higher-wage-paying sectors still struggle.
Consider this: since the year 2000, the U.S. has lost five million manufacturing jobs. (Source: Economic Research, Federal Reserve Bank of St. Louis web site, last accessed March 26, 2015.) Meanwhile, since 2009, jobs related to retail have grown nine percent. Let’s not blame this on the robots, but seriously consider if the economy is adding more and more unskilled jobs, while in the process, under-employing workers.
In February of this year, Wal-Mart finally increased its wages by 24% to $9.00 an hour. This is great news for low-wage-earners, but $9.00 just isn’t enough. Wages and income growth for many Americans have stalled. Since 2000, the real median income has dropped by nearly $5,000, from $56,800 a year in 2000 to $51,939 in 2013.
Jobs Market and U.S. Economy
Face it: if the jobs market continues to struggle, the U.S. economy won’t grow. Americans working part-time, or working jobs where the pay isn’t higher, will simply lead them to pull back on their spending, which is bad news for an economy that relies largely on consumer spending to prop up gross domestic product (GDP) growth.
We’re already seeing the effects. To give you some perspective, new-home sales are dreary at best—61% below what they were back in July of 2005. (Source: Economic Research, Federal Reserve Bank of St. Louis web site, last accessed March 27, 2015.) Mind you, this is just one place where spending has stalled immensely.
The bottom line is that wages are stagnant. While it is a positive that jobless claims are at all-time lows, they do not fairly reflect the depressed labor market.