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The Labor Market Is in Worse Shape Than You Think

Daily Ticker

The ADP National Employment Report revealed Wednesday that private employers hired 158,000 workers in March -- the smallest gain in five months and below economists' forecasts of around 200,000.

Many of these new jobs are in low-paying sectors such as retail, food services and health care. The Bureau of Labor Statistics (BLS) reported in February that retailers hired 252,000 new workers over the past 12 months and the industry overall has recovered 723,000 jobs since reaching a low in December 2009. In comparison, the construction industry has added just 349,000 new jobs since reaching its employment low in January 2011.

The U.S. economy has increased payrolls by 355,000 since the beginning of the year and employers added more than 1.8 million jobs in all of 2012. This Friday the BLS will give its latest snapshot of the domestic labor market. Economists are expecting an average gain of 200,000 jobs in March.

Thirty consecutive months of job growth has helped the U.S. economy recover from its darkest days in 2009, but the national unemployment rate still remains high at 7.7%. According to Robin Harding, U.S. economics editor at the Financial Times, the U.S. has shed nearly two million clerical jobs since 2007 while creating just 387,000 managerial positions, setting up a polarization in the labor market.

“We’re seeing this ongoing structural change as well as a cyclical change” in the economy, Harding says. “Someone finding a job in this economy may not be finding the kind of job they’d like to.”

Harding says the shift to low-wage jobs from “good middle-class” jobs such as construction, book keeping, data entry and bank telling, has led to growing income inequality. These positions have been replaced by modern IT systems that companies are using to cut costs and increase their bottom lines.

“Companies are finding ways to automate these office processes,” Harding says, and this leads “to a lot fewer of the steady office jobs that the middle class has been relying on since the second world war.”

Harding analyzed salaries for fast-growing occupations over the past year. He found that the average wage for a clerical job in 2012 was $34,410. But the positions that are being created in this economy – like a personal care aid – paid on average of $24,550.

This downward trend in salary does not apply to every industry, Harding notes. Computer programmers, for example, can command high salaries because that industry faces a shortage of qualified workers. Policy makers in Washington have been trying for decades to stem the losses of living wage middle-class jobs, Harding says, but improvements in education and job training require a lot of investment – which the government may not be inclined to pursue these days.

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