(What’s Left of) Our Economy: More Reopening, Not Endless Money, is Now the Best Jobs Strategy

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African Americans, American Rescue Plan, Biden, CCP Virus, coronavirus, COVID 19, Covid relief, education, Employment, Federal Reserve, Hispanics, hotels, Jerome Powell, Jobs, Latinos, leisure and hospitality, lockdowns, recovery, restaurants, shutdown, stay-at-home, stimulus package, unemployment, wages, Wuhan virus, {What's Left of) Our Economy

There’s no doubt that the American jobs market has suffered an out-and-out disaster since it got hit by the CCP Virus and the follow-on lockdowns and other restrictions. There’s also no doubt that many workers and their families are still suffering greatly, and will need government aid to make it to the Other Side, and the Biden administration’s American Rescue Plan legislation that the President will likely sign into law soon will help fill this gap.

Plenty of doubt remains, however, about whether all, or close to all, of the massive funds approved in this measure are actually needed to cure the economy’s remaining employment woes, and one of the main reasons is the nature of the jobs blow that’s been delivered. Because it’s been so heavily concentrated in the country’s leisure and hospitality industries (encompassing eateries and drinking places of all kinds, plus hotels and motels, and entertainment and cultural venues), it’s entirely possible that nowadays, the most effective way to fix the jobs market fastest would be to lift the lockdowns and other mandated curbs that have fallen so hard on sectors that depend on serving in-person customers.

The case for relying on a virus-relief/stimulus package this big, at this stage of the economy’s recovery from its pandemic-induced recession, has been eloquently stated by President Biden and by Federal Reserve Chair Jerome Powell. The former warned just before the legislation passed that the U.S. economy “still has 9.5 million fewer jobs than it had this time last year. And at that rate, it would take two years to get us back on track.”

The latter has stated that he won’t be satisfied that full employment has returned until he sees what one reporter has called “broad-based gains in employment, and not just in the aggregate or at the median.” As a result, the Fed Chair is paying particular attention to (the reporter’s words again) “Black unemployment, wage growth for low-wage workers and labor force participation for those without college degrees, categories that historically have taken longer to recover from downturns than broader metrics.”

But it’s precisely these less fortunate portions of the workforce that would be helped disproportionately – and then some – by focusing on reopening steps that would surely affect the leisure and hospitality industries just as disproportionately.

If you doubt the importance of leisure and hospitality job loss over the last year in terms of overall U.S. jobs loss, here’s what you need to know. Of the 8.068 million positions shed by the country’s private sector between last Februrary (the final month of pre-CCP Virus normality for the American economy), fully 3.451 million have come in the leisure and hospitality industries. That’s nearly 43 percent.

Put differently, during that final normal economic month, leisure and hospitality workers represented just 13.04 percent of all private sector workers. Yet their employment plunge was more than three times as great relatively speaking.

Moreover, leisure and hospitality’s progress in getting back to pre-pandemic square one has been slower than that of the private sector overall. Since the April employment trough, leisure and hospitality has regained 4.955 million of the 8.224 million jobs lost during the worst of the pandemic, or 60.25 percent. For the private sector in toto, 13.267 million of the 21.353 million jobs lost in March and April have come back since – 62.13 percent.

It’s also clear that many of the kinds of workers about which Fed Chair Powell has been most concerned are concentrated in leisure and hospitality. For example, in 2019, (America’s last pre-CCP Virus full year), 13.1 percent of these sectors’ workers were African American versus 12.3 percent for the entire U.S. economy (including government workers at all levels), and 24 percent were Hispanic or Latino versus 17.6 percent for the entire economy.

Leisure and hospitality companies tend to employ Americans with low levels of formal education, too. According to the Labor Department, in 2019, 79.9 percent of the nation’s “first-line supervisors of house-keeping and janitorial workers” 25 years and older lack even an associate’s degree, and 76 percent of their food preparation and service counterparts fall into this category. The shares are even higher for the workers they supervise. Meanwhile, only 51.5 percent of all U.S. workers haven’t taken their education beyond high school.

Not surprisingly, therefore, leisure and hositality jobs pay poorly. In February, 2020, just before the arrivals of the pandemic and the lockdowns, their average hourly wages were only 59.28 percent those of all private sector workers. Last month, this figure had fallen to 57.58 percent. (See Table B-3 here.) 

For most of the pandemic period, the U.S. government at all levels pursued a mitigation strategy that aimed mainly at curbing economic and other forms of human activity across-the-board. Now, even with vaccinations and growing population-wide immunity showing strong signs of bringing the pandemic under control, the Biden administration and the Democratic Congress are just as determined to stimulate the economy that’s still significantly shut down by with an American Rescue Plan that seems just as indiscriminate.

As I’ve been writing (see, e.g., here), it should have been clear since late last spring that the anti-virus fight would have much more effective (and less harmful to the economy and other dimensions of public health) had it targeted protecting especially vulnerable populations. I strongly suspect that, with the fullness of time, it will become just as clear that a stimulus and jobs strategy emphasizing accelerating reopening, and thus aiding sectors and workers hardest hit by the remaining shutdowns, will prove a much more effective employment cure than the indiscriminate spending approach on which Washington has just doubled down.

(What’s Left of) Our Economy: Another Sign of Wage Stagnation – from the Job Turnover Numbers

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Employment, Great Recession, Jobs, JOLTS, Labor Department, leisure and hospitality, non-farm jobs, professional and business services, recovery, retail, wages, {What's Left of) Our Economy

Since the economy has been moving for quite a while now to full employment (at least as conventionally measured), I haven’t been monitoring the Labor Department’s data on job turnover (the “JOLTS” figures, per the acronym of its official label) as in years past. But yesterday I checked out the numbers reported yesterday morning, and see that this lapse has been shortsighted.

For the JOLTS data are still confirming that the purportedly red-hot, super-tight U.S. labor market is still under-performing according to a key measure – wages. Indeed, the new JOLTS numbers (for November) offer one important explanation: The job openings being advertised by businesses in low-wage industries are outgrowing those in better paying sectors.

The best way to show this trend is to look at the share of total non-farm jobs (the Labor Department’s U.S. employment universe) at key recent points in the business cycle that have been comprised of low-wage jobs, and compare them with the job openings figures at those times.

To remind RealityChek regulars and clue in others, my proxy for low-wage jobs consists of the retail sector, the leisure and hospitality sector, and the big low-wage portion of the professional and business services sector (e.g., janitorial services, landscaping services, call centers, bill-collection services, security services, and the like).

As of November, the hourly wages for these sectors, respectively, were (without adjusting for inflation) $18.28, $15.60, and $20.05. For the private sector as a whole, the hourly wage that month was $26.54.

When the Great Recession broke out, at the end of 2007, these parts of the economy combined represented 26.81 percent of total non-farm employment. When it ended, in the middle of 2009, this share had dropped only to 26.23 percent (by 2.16 percent) – even as overall payrolls dropped by 5.34 percent.

Since then, the low-wage share of all U.S. jobs has risen to 27.74 percent. And the JOLTS data tell the same story – especially during the ongoing recovery.

When the recession began, and low-wage jobs were 26.81 percent of total non-farm employment, they represented 31.94 percent of the job openings advertised by American employers.

During the recession, they were actually in less demand, in absolute and relative terms. In June, 2009, with low-wage jobs accounting for 26.23 percent of the total, such positions represented just 28.38 percent of total job openings. (My figure for the low-wage professional and business services positions is based on their share of jobs in that sector for the month in question. It isn’t broken out in the official JOLTS reports.)   

The results for last November (again, the latest available)? Low-wage jobs had grown as a share of total non-farm employment to 27.74 percent. But as a share of job openings, they had risen much higher – to 34.53 percent.

So because wage lag is still such a prominent feature of the American economy, I’m back on the JOLTS case. When the quality of job opportunities in the labor market starts showing sustained improvement, we’ll have grounds for believing that the long national nightmare of stagnant wages is ending.

(What’s Left of) Our Economy: A Key Employment Report was a Bit Better Than it Looked

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Employment, Federal Reserve, hiring, Janet Yellen, Jobs, JOLTS, leisure and hospitality, professional and business services, real private sector, retail, subsidized private sector, turnover, wages, {What's Left of) Our Economy

I’m steadily getting less convinced that the Labor Department’s monthly JOLTS report is such a great measure of the job market’s health any more. After all, one of the main trends tracked in this data series on turnover on the employment scene is job openings – which have been very strong lately. At the same time, it’s getting clearer and clearer that many businesses are getting ridiculously picky in their actual hiring, so the gap between the positions they say are available and jobs they are actually likely to create keeps getting wider and wider.  (Businesses, for their part, insist that the labor market isn’t supplying the workers they want.)  

Nonetheless, it’s one of the favorite labor market indicators of Fed Chair Janet Yellen, (a leading labor economist) and therefore is crucial to the central bank’s decisions to raise (or, at some point, re-lower) interest rates. So since the tightness or easiness of credit clearly bears on employment levels, and the entire economy’s performance, ignore the JOLTS findings at your peril!

August’s results came out on Friday – when yours truly was tied up with personal matters – but it’s worth noting that they broke a pretty reliable recent pattern: The headline figure on job openings was a good deal worse than one crucial internal figure. As always, the internals speak volumes on job quality.

Overall nonfarm openings fell by 5.27 percent month-to-month from July levels. The latter total admittedly was the latest in a series of new monthly records set recently, but the drop-off was the biggest proportionately since July, 2012. The story was similar, though not quite as ominous, in the private sector. The August openings decrease of 5.08 percent – also from a new record July level – was only the steepest since last September. These August findings could improve, as they are still preliminary. But September’s (also still preliminary) monthly jobs report was so dreary that upcoming JOLTS reports could feature even weaker openings numbers.

The good news concerned the share of openings announced in the economy’s lowest wage sectors. This figure can be estimated by taking two hard numbers (openings in the retail and leisure and hospitality sector) and adding to them a softer number (openings in the lower-wage segments of the overall high-wage professional and business services category). These less lucrative positions accounted for 42.91 percent of total August employment in that larger services grouping, so I (not unreasonably) assume that they generated the same share of openings.

At the onset of the last recession, in December, 2007, total low-wage job openings came to 30.46 percent of all openings. By the time the recovery technically began, in June, 2009, this number shrank to 29.48 percent. This August, it was up to 33.09 percent, reinforcing claims that the strong jobs recovery during the current economic expansion has featured too much low-quality job creation. But the latest August numbers – again, which are still preliminary – were a bit lower than the previous August’s 33.52 percent. Two cheers! 

Somewhat more discouraging was the continued prominence of openings in the subsidized private sector of the economy versus the “real” private sector. The former include industries like healthcare services, whose vigor (including job opportunities) depend heavily on government subsidies. As a result, because that portion of the private sector whose fortunes rise and fall due mainly to market forces generates most of America’s productivity growth and innovation, an excessively strong subsidized private sector can throw off assessments of the economy’s real strength and prospects.

When the last recession began, more than seven years ago, the subsidized private sector generated 17.74 percent of all reported job openings. That number jumped to 21.98 percent by the June, 2009 technical start of the recovery, because healthcare was virtually the only remaining employment game in town for America. As the real private sector recovered, subsidized private sector job openings retreated – back to 17.91 percent of the total by August, 2014. (This figure was still higher than when the recession began.) This August’s (still preliminary) estimate has it rebounding to 18,49 percent. And given those poor September overall job-creation totals, the subsidized portion of the private sector could look even more dominant when that month’s JOLTS report comes out.

Again, the JOLTS reports don’t tell us everything we need to know about the American employment scene. But since the Fed takes them so seriously, you should, too. How, though, will the central bankers interpret these new results? Outside Fed HQ, only a mind-reader could possibly know.

(What’s Left of) Our Economy: The New JOLTS Data Flunk the Job Quality Test

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administrative and support services, Employment, job openings, job quality, Jobs, JOLTS, leisure and hospitality, professional and business services, recovery, retail, subsidized private sector, wages, {What's Left of) Our Economy

If you’re into quantity over quality, you’ll agree with the apparent consensus this morning that the just-released Labor Department JOLTS report was good news – and could put pressure on Federal Reserve chair Janet Yellen to raise interest rates at the central bank’s meeting this month, since it’s one of her favorite measures of labor market health. If you rank quality higher, you’ll have real doubts, for the new statistics on turnover in the labor force make clear that the American jobs market keeps morphing into an ever lower-wage jobs market.

Quantity-wise, the JOLTS report was indeed a winner, showing openings for a record 5.753 million employment opportunities in July – an all-time monthly high. But an unusually large share of these job openings came in anything but the kinds of positions any responsible parent would want their child to choose for a career. I can’t say that this is a record (that would take lots of numbers crunching) but fully 34.09 percent of the openings were in the low-wage sectors of retail, leisure and hospitality, and a low-paying sub-sector of the professional and business services category called administrative and support services. (See last month’s JOLTS post for more info on this latter group of service jobs.)

But I can say that this low-wage share of the latest monthly job openings number (all the July data are preliminary) is higher than its June counterpart – which itself was revised upward from 32.79 percent to 33.14 percent. It’s higher than the level from a year ago (32.09 percent). It’s higher than its level when the current recovery technically began, in June, 2009 (29.48 percent). And it’s higher than where it was when the last recession began, in December, 2007 (30.46 percent).

I completely agree that for a great many reasons, any job is better than no job at all. But shouldn’t an advanced economy like America’s that’s more than six years into an economic recovery be creating better and better job opportunities for its population, not worse and worse?

The lone development that arguably could pass for good news in the JOLTS report is the dip in the share of job openings in the government-subsidized private sector – industries like healthcare services, where levels of demand and employment largely stem from politicians’ decisions, not market forces. Such openings represented 17.96 percent of all openings in July – down pretty significantly from an 18.82 percent June figure that itself was revised down from 18.86 percent.

Even better, this preliminary July figure is also lower than last July’s 18.11 percent, and way down from the 21.98 percent level it hit when the recovery began, and healthcare hiring was the only part of the jobs market showing any life at all. But the government-subsidized private sector generated only 17.74 percent of new job openings at the last recession’s December, 2007 onset, indicating that, again, six-plus years into a recovery, even on the quantity side, the “real” private sector still isn’t pulling the job-creation weight that a truly vibrant economy needs.

(What’s Left of) Our Economy: Why it’s a Larry David Jobs Recovery

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administrative and support services, Curb Your Enthusiasm, Employment, Jobs, Larry David, leisure and hospitality, low-wage jobs, non-farm payrolls, recovery, retail, wages, {What's Left of) Our Economy

I thought I was all finished (mildly) trashing the monthly jobs report that occasioned so much euphoria in the economics world upon its release last Friday, when a quick perusal revealed another big problem. Not only did the Labor Department survey confirm a trend of more and more employment creation coming from parts of the economy heavily reliant on government subsidies (like health care). It also made clear that ever more of the jobs being generated during the current recovery are low-wage positions – which can’t be a sign of anything like real economic health.

First, some definitions. By low-wage, I mean jobs whose hourly wage is less than the private sector average ($24.96 as of the latest available – May – pre-inflation data). Three sectors make up a representative sample: retail, leisure and hospitality, and administrative and support services. Not that these industries contain all of America’s low-wage workers, but taken together they’re a good proxy.

That jobs report last Friday told us that in toto, those industries accounted for 27.68 percent of all U.S. non-farm jobs (the Labor Department’s American jobs universe) in May. (These figures are still preliminary.) But it also made clear that they fueled 45.36 percent of the economy’s overall job growth that month. That’s both much higher than their share of employment and much higher than their January monthly contribution: 29.40 percent.

The year-on-year trends are less dramatic, but they tell the same story. From January, 2014 to January, 2015, low-wage jobs amounted to 34.42 percent of all non-farm jobs the economy added. In May, this year-on-year improvement was up to 35.40 percent.

In fact, since the recovery began – technically in the middle of 2009 – total non-farm employment is up 8.20 percent – 10.735 million jobs. But these low-wage positions increased on net by 14.10 percent – 4.8453 million jobs. Put differently, the low-wage sectors have generated 45.14 percent of all the nation’s jobs comeback since the recession officially ended.

Of course, it’s a free country, so economists and others can interpret these results as they wish. But it’s clear to me that the nation’s enthusiasm about jobs trends should be curbed – which would make this a Larry David Jobs Recovery.