Real Unemployment Situation: Approximately 26,000,000 Unemployed or Underemployed. Job Growth in $10 per Hour Jobs while $20 per Hour Jobs Disappear.
- 7 Comment
On Friday, we learned that the unemployment rate jumped to 9.4 percent from last month’s 8.9 percent. The BLS data surveys 160,000 businesses and government agencies that affect roughly 400,000 people so the data does cover a large portion of Americans and gives us a good sample size. The markets were largely moving sideways on Friday unable to make sense of the mixed data because we are still largely living through a highly volatile market.
Yet the interesting thing that happened on Friday was the jobs lost in May were much smaller than expected. The market was expecting a 500,000+ job loss month and only 345,000 jobs were lost for the month. Yet the market was also expecting a rise of the unemployment rate to 9.2 percent while it spiked up to 9.4 percent, the 0.5 percent jump is tied for the largest monthly jump since the recession started (the other major monthly jump occurred in February).
So this is good news right? Well any time we see job losses abating that in fact is good news but we have to look at the data more closely before arriving at any major conclusions:
It is clear that the actual raw number of job losses is improving but the troubling sign is deeper in the data. Nothing highlights this more than Wal-Mart announcing it will hire 22,000 workers and expand while General Motors on Monday announced it would be filing for bankruptcy and downsizing. We are shifting to retail low wage work while destroying higher paying manufacturing work. Let us first look at what occurred in May:
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As you can see from the chart the biggest sector to lose jobs in May was “goods-producing” jobs which pay higher wages. We saw an increase in leisure and hospitality work. This would be good if it wasn’t the case that we were replacing $20 per hour jobs with $10 per hour jobs selling goods produced in other countries.
Now if we look at the hourly wages we start realizing that there may be little improvement in the employment picture when it comes to better paying jobs:
Now why is this occurring? Well the first thing we need to understand is that this is the deepest recession since World War II and probably since the Great Depression. The large pseudo-prosperity of the past three decades has been based on major bubbles including the housing and technology bubbles. Now much of the good paying jobs during this decade occurred in the finance and real estate sectors. Those jobs are largely disappearing and not earning what they once did. But more troubling has been our systematic dismantling of manufacturing. The case of Wal-Mart contrasted with GM this week tells us where we are heading. We are breaking our employment base into a largely service driven economy. For all those claiming this is good ask those people working in manufacturing who just lost $20 per hour jobs and now are battling it out for $10 per hour jobs at Wal-Mart.
This did not occur over night:
As you can see, since the early 1980s we have replaced “durable good” jobs with “leisure and hospitality jobs” which basically means we stopped making things and started consuming things in large quantities. Unfortunately we did all of this with massive amounts of debt that have now put our country at risk.
If we break down the unemployment numbers further, we see that nearly 26,000,000 American workers are either unemployed or underemployed:
Part-time workers: 9,100,000
Marginally Attached: 2,200,000
Total = 25,800,000 unemployed or underemployed workers
The U-6 rate is at its highest point ever measuring a more accurate picture of the employment situation registering a 16.4 percent rate. It is amazing how high our part-time work force has now become. Keep in mind the large number in this group have no benefits and no security of a full-time job. The growth in this area is troubling. In May of 2008, we had 5.2 million workers classified as “part-time for economic reasons. Now, that number has grown to 9.1 million. An increase of 75 percent in only one year is troubling but this is the new trend of replacing $20 per hour jobs with $10 per hour jobs. Although it is good news that job losses are not so deep, one $20 job lost is the equivalent of two people finding $10 per hour jobs.