Job numbers rise but with hidden costs

New positive figures disguise the fact that many today work for less pay or have stopped looking for jobs altogether

So here’s the good news: 217,000 more Americans were added to the workforce in May. It's the fourth straight month of more than 200,000 new jobs. After a slow start in the first quarter of 2014, the harsh winter seems to have thawed, and employers started to hire again.

The private sector led the way, with professional and business services adding 55,000 jobs. The health care sector added 34,000 jobs, twice its average monthly increase in the last year.

The U.S. lost a tremendous number of jobs during the Great Recession, hitting bottom in October of 2009, with 1 in 10 American workers without a job.

It took more than six years, but the economy has finally replaced the jobs lost during the recession. All 8.7 million of them.

Millions of Americans are on the sidelines, burdened by an economy nursing itself back to health. Add the growth in the population and labor force since the beginning of the recession in 2008, the U.S. is still short millions of jobs.

Ten million Americans who could be working are not. A third of those unemployed have been out of work long term, for six months or longer.

In the years since the darkest days, earnings have been stagnant. In fact, hourly wages are lower now (adjusted for inflation) than they were when the recession technically ended in June of 2009. That's largely because of the growth of low-pay jobs like retail and food services. 

The unemployment rate is at 6.3 percent, and a large problem of the slow job recovery is that older Americans are finding it hard to hold on to their jobs. The so-called prime-age workers have been hit hardest.

More than 15 percent of millennials are without work, and nearly 2 million of them have stopped looking for work altogether.

What is keeping wages down in these new jobs?

What are the long-term effects of these bad numbers?

We consulted a panel of experts for the Inside Story.

How has the Great Recession affected Hobby Works’ HR policies, including wages and hiring?

Mike Brey: It derives from business. My industry has suffered during the recession. We don’t sell anything people need. So if you are looking to cut back, a remote-controlled airplane or drone is easily cut out of the budget. From a business standpoint, the past seven years have been really hard for us. The worst of the recession for us was mid-2011. Since then, we have come back, but it is very slow, and in fact, last year was very hard. We are not doing a lot of hiring because the people already here want more hours.

Do you have a wage freeze in place?

We have had an official wage freeze, but we have still been doing small increases for people who are new, and we are moving up. In general, my store managers, whose wages depend on the success of their stores, have not been going up. No managers have gotten raises, myself included. Sales are flat, and profit margins have taken a big hit. In a hard-goods business like ours, we have been suffering due to online sales. 

We are also very affected by consumer confidence, which is still low. We were on pace to open stores every three years. Obviously, we have not opened a store since 2006. That is where job growth comes from. That is not unique to me. It is a story among a lot of retail. 

What is keeping wages down in these new jobs ?

Adam Hersh: These jobs are being created in industries that have traditionally had low wages and no real job ladder. Wages are kept down because there is a lack of unionization to give bargaining power and there is an erosion of the real buying power of the minimum wage. A lot of the minimum-wage jobs are concentrated in the growth industries of food services and retail. There is also a trend of global competition in low-wage jobs, which keeps wages low.

And, of course, there are a lot of people out there who would like to have a job but don’t have one and are willing to work for less, so they put a lot of downward pressure on wages.

What are the long-term effects of these bad numbers?

Well, we can look at long-term effects of the people who are affected as well as the effects on the economy overall. For the people affected — the unemployed and long-term unemployed — the prospects of being re-employed diminish every day they are out of work. Not only that, if they find a job, they will most likely get paid less. Some of their skills will deteriorate over time, reducing their earning ability.

For the economy overall, when people are not working, the economy is not operating at its full potential. You are not getting the kind of feedback you would get under normal circumstances. That means there is less investment than there would be under full employment, and as a result, productivity growth and innovation is slower and less than it could be in the economy. 

What have you been seeing in the job market since the 2008 crash?

Kathy Robinson: It has been a long arc. In 2008, 2009, 2010, a lot of people were scrambling to find something, and people in jobs were clinging on as tightly as they could. Even as late as the end of last year, things were moving but very sluggishly. Early this year, people were hiring, but they were being very selective and making decisions slowly. Recently I have been seeing companies moving more quickly. It seems like a sign of optimism on the part of the companies.

Is there a disconnect between the optimism of politicians and the reality of the job market as you have seen it on the ground?

When you think about the hill we have had to climb up and the hole we have had to fill with the people who were laid off in massive numbers, the fact that now companies are moving and people are getting jobs is hopeful. There is activity. Companies see good things happening in the economy. Even though it has been a sluggish rebound, it is a rebound. That is great news for people who have been on the sidelines for a while.

Still, will wages continue to stay down for even longer?

I am seeing that there are not a lot of wage increases happening. When it occurs, it is often a lot of very slight increases. There is a lot of conversation from companies saying, “Hey we have got this great job, but we are not sure we can afford you.”

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