Nearly 100,000,000 Americans no longer work as real unemployment reaches new records
Recent unemployment data appears encouraging on the surface, but when you look at underlying labor data, there is much more than meets the eye, and the news is not good.
According to Bloomberg News and other media, the unemployment rate dipped to 5.6 percent in December, which “capped the best year for the labor market since 1999 and reinforced the U.S. role as the global economy’s standout performer.”
In December, said the U.S. Labor Department, the economy generated 252,000 jobs, which followed the creation of 353,000 jobs in November, bringing the jobless rate to its lowest level since 2008.
“We have continued, solid job growth,” Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, who projected a 240,000 gain, told the business newswire. “It shows really solid momentum in U.S. growth. There are not a lot of places in the world where we see that these days.”
In all of 2014, about 3 million more Americans found work, the largest gain in 15 years and one sign that companies believe U.S. demand is going to continue, even as markets overseas are struggling.
Wages have been stagnant for decades
The Labor Department report also showed, however, some bad news: that earnings were also down, Bloomberg News reported, and that record numbers of Americans were no longer in the workforce.
“The drop in workers’ hourly wages means Federal Reserve policy makers are less likely to move up the timing of an interest-rate increase,” Bloomberg reported — all well and good, but wages have been stagnant or falling for decades, even as corporate profits have been rising.
As noted by the Pew Research Center, Americans may be earning more, but their purchasing power has not improved:
For most U.S. workers, real wages — that is, after inflation is taken into account — have been flat or even falling for decades, regardless of whether the economy has been adding or subtracting jobs.
Pew notes that workers are compensated in various ways — health insurance, retirement accounts, and so forth — but wages are 70 percent, on average, of a worker’s compensation.
As such, according to the Bureau of Labor Statistics, a division of the Labor Department, the average hourly wage for non-management private-sector workers in September was $20.67, which was the same as in August and 2.3 percent above the average wage one year prior.
“That’s not much, especially when compared with the pre-Great Recession years of 2006 and 2007, when the average hourly wage often increased by around 4% year-over-year,” Pew said. And, during the high-inflation years of the 1970s and early 1980s, wage increases would average around 8-9 percent or more for several years.
“But after adjusting for inflation, today’s average hourly wage has just about the same purchasing power as it did in 1979, following a long slide in the 1980s and early 1990s and bumpy, inconsistent growth since then,” Pew noted. “In fact, in real terms the average wage peaked more than 40 years ago: The $4.03-an-hour rate recorded in January 1973 has the same purchasing power as $22.41 would today.”
Then there is the fact that fewer Americans are even in the workforce today.
More jobs but still too many workers chasing them
As reported by Breitbart News, the Labor Department noted in its most recent report that a record 92,898,000 Americans 16 years and older did not participate in the labor force in December.
That phenomenon is two-fold, say analysts: more baby boomers retiring, but also more Americans becoming frustrated and dropping out of the workforce altogether.
“It’s always welcome news when more Americans find work,” House Speaker John Boehner, R-Ohio, said, in reaction to the Labor Department report. “Yet while the economy is showing some signs of improvement, far too many middle-class families are struggling to bridge the gap between rising costs and stubbornly flat paychecks.”
Writing in The Washington Post, Jared Bernstein, former chief economist to Vice President Joe Biden, commented on the discrepancy between labor force participation and wages:
As the pace of job growth has picked up, the labor force has stabilized, and that’s a good sign. But the participation rate is still low and some economists, including me, believe there are significant numbers of people who are not officially in the labor force — they’re neither working nor looking for work — but would come back if decent jobs were available.
In other words, he says, the reason why wages are not going up much is because, while there are more jobs, there are still “too many workers chasing them,” so employers don’t have to ratchet up hourly wages to attract candidates.