The US economy is doing quite well. But Eduardo Porter's New York Times piece today notes Pockets of Concern Slow a Strong U.S. Economy, especially the labour market. Here's an excerpt:
Yet, amid the vim and vigor, there is a weak spot that does not quite mesh with these readings. More than four years since the economy emerged from recession in November of 2001, businesses are still not hiring much. Employment grew by a mere 3.5 million jobs, or 2.7 percent, in 49 months' worth of this economic expansion. Last year, the job market grew by 1.5 percent.
This is not negligible. The unemployment rate, the most frequently used measure of labor-force vitality, dipped to 4.9 percent in December. This is the lowest it has been in more than 30 years except for the prosperous late 1990's, when it fell briefly below 4 percent.
But compared with similar moments in the nation's economic history, this shot of job growth appears less brisk than at first blush. In the 49 months after the recession of the early 1990's, employment jumped almost 8 percent. It surged by more than 13 percent in the same period after the recession of the early 80's. What growth there is comes from a decline in the pace of layoffs, not from employers picking up hiring.
In the first quarter of last year - the last period for which there is published data from the Bureau of Labor Statistics - employers hired 7.6 million people, still almost a million less than the average pace of hiring in the second half of the 90's.
And even as the declining unemployment rate seems to indicate plenty of opportunity in the labor market, workers' wages are still treading water, especially along the bottom rungs of the income scale, suggesting there remains substantial slack in the labor market.
In fact, wage growth has slowed. According to Jared Bernstein of the Economic Policy Institute, growth in the median wage dropped to 2.4 percent in 2004 and 2005, from about 3 percent, on average, in 2002 and 2003, the first two years after the end of the recession.
In real terms, taking inflation into account, wages have declined in the last two years across all pay scales except for the very top earners, according to Mr. Bernstein's crunching of census data. Last year, the wages of ordinary workers in production jobs and other nonmanagement positions declined by 0.4 percent, after accounting for inflation."By some measures, the economic expansion has been impressive," Mr. Bernstein said. "That employers are still so cautious about hiring is extraordinary."
...As a share of national income, workers' wages and salaries are 2 percentage points below where they were in 2000. Meanwhile, corporate profits have escalated to levels not seen in more than half a century. In the third quarter of last year, profits after tax rose to 9.6 percent of national income, the highest corporate share since 1950.
Some economists suspect that the lingering effect of technology breakthroughs spurring productivity growth may still be weighing on employers' appetite for hiring. Others speculate that competition from cheap labor markets like China is impelling American companies to become more productive by wringing more out of their existing work forces, and weakening workers' general bargaining position.
I was thinking, wouldn't job recovery be expected to be weak given it was at such unnatural and unsustainably low levels before the collapse of the Dotcoms?
GREAT CHART!
Posted by: Captain Capitalism | Tuesday, January 24, 2006 at 03:55 PM
Over the last 2 years we have been given ‘weekly initial State unmployment claims’ figures, then that data disappears, then things improve by 92%. I should be rejoycing in this improvement but my faith and trust has been jaded by the ’spin’.
Posted by: r4 sdhc | Monday, February 08, 2010 at 11:19 AM
The article talks about control, what it is like to communicate with parents, Knowledge is a treasure
Posted by: Supra skytop | Thursday, November 04, 2010 at 06:00 AM