Jobs Stall and So Does the Economy

The employment report for August suggests that any remaining hope for an economic upsurge in the second half of 2014 is largely unrealistic. The new data, which shows job creation down sharply last month, is consistent with more of the same sluggish growth that has long been the norm. Plentiful jobs at good pay — the critical underpinning of a strong economy — are still not in the cards.

On average, the economy added 207,000 jobs a month from June through August, exactly even with average monthly job growth over the past 12 months. That’s a holding pattern, not acceleration. Similarly, the jobs report for August showed flat wages, stagnant hours and elevated long-term unemployment, as has been the case in previous reports.

The latest data also underscore how incremental improvements in labor conditions have failed to undo the damage from the recession and the prolonged slow recovery. For example, the share of adults in the labor force is no longer declining, as it did in 2013, but it remains at levels last seen in 1978.

The recent unemployment rate, 6.1 percent, is down from the recession-era high of 10 percent in 2009, but it is still higher than at similar points in recoveries from other downturns going back to 1982. Worse, the unemployment rate today would be 9.6 percent if it included the estimated 5.9 million jobless people who would be working or looking for work if the job market were stronger.

The generally bleak monthly data are broadly in line with other data on income and wealth released this week by the Federal Reserve. From 2010 to 2013, the Fed found that average incomes dropped by 8 percent for the bottom 20 percent of families and rose by 10 percent for the most affluent 10 percent. For everyone in between, incomes fell or stagnated.

Wealth was also skewed. Overall it barely grew from 2010 to 2013. But it fell by 21 percent for the bottom 20 percent of families, to a mere $65,000 of net worth, and rose by 2 percent, to $3.3 million, for the top 10 percent.

It is increasingly obvious that inequality of income and wealth are weighing on economic growth — especially on job creation and pay raises — by concentrating income and assets in the hands of a few who already have more than they can spend.

The situation is not self-correcting. In fact, in the absence of government policies to foster balance, it is self-reinforcing. The Fed should continue to try to stimulate the economy with loose monetary policy. But only Congress can put in place the broad new policies on taxes, labor standards and immigration that will give all Americans a shot at a rising standard of living.

Source: The New York Times, “Jobs Stall and So Does the Economy” http://www.nytimes.com website. Accessed October 9, 2014.http://www.nytimes.com/2014/09/06/opinion/jobs-stall-and-so-does-the-economy.html?smid=nytcore-ipad-share&smprod=nytcore-ipad&_r=2