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Low-wage jobs drive gains in U.S. employment

June 6, 2014 at 6:13 PM EST
American employment now exceeds pre-recession levels, but most of the jobs created have lower wages. That's according to May’s government labor data, which shows that despite gains of 200,000 jobs, the unemployment rate hasn't budged. Economics correspondent Paul Solman talks to MIT labor economist Paul Osterman for his take on the numbers.
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JUDY WOODRUFF: The latest government jobs report shows the American labor market moving into its strongest hiring pace in years. Employers added 217,000 jobs last month, and the unemployment rate remained at 6.3 percent, its lowest level since September 2008.

May also marked an important moment: the highest total payroll level in U.S. history, all in all, a seemingly solid report. But those looking closely say it’s premature to celebrate much, especially when at least 10 million people are still looking for work.

NewsHour economics correspondent Paul Solman has the story, part of his ongoing reporting Making Sense of financial news

PAUL SOLMAN: Today’s headline: May was the fourth straight month employers added more than 200,000 jobs, the last time that happened, more than 14 years ago. Yet the unemployment rate didn’t budge.

So we asked MIT labor economist Paul Osterman for his take.

PAUL OSTERMAN, MIT Sloan School of Management: Good news and bad news.

PAUL SOLMAN: You know, it seems like every month, I interview someone like you on the first Friday of the month, and they say, good news, bad news.

PAUL OSTERMAN: That’s right. There’s a reason for that, the good news, 200,000 jobs in a month added. That’s great. The bad news, the level of pain out there has not changed. There’s still about 20 million people who are either unemployed, working part-time jobs, but would like full-time jobs, or not in the labor force, but would like to be in the labor force. That number is just stable, and it’s a lot of pain.

PAUL SOLMAN: The unemployment rate stayed constant, but that’s because we added 200,000 jobs, added 200,000 people to the labor force.

PAUL OSTERMAN: That’s right. But think of the population and think of the number of people in the population who are working. That tells you how healthy the economy is, how good the job market is. That number plummeted in the recession, and has barely climbed back up. We’re not at pre-recession levels.

PAUL SOLMAN: Indeed the so-called employment-to-population ratio has been below 60 percent for five years now, down almost one-seventh from the ratio pre-recession, to a low last seen in the Reagan recession of the early ’80s.

Now, the economy is adding jobs. In fact, May marked a milestone: Five years after the end of the great recession, we have finally regained the nearly nine million jobs that were lost.

But Osterman, who has researched the quality of the new jobs, says they represent no progress in wages for the economy as a whole.

PAUL OSTERMAN: Twenty to 25 percent of all adults who are working are in poverty level jobs, jobs that if they worked full-time, full year, wouldn’t raise them above 125 percent of the poverty rate for a family of three.

PAUL SOLMAN: A recent report by the National Employment Law Project found that lower-wage jobs in sectors like restaurants, retail and administrative services have accounted for the lion’s share of the job gains since 2009.

Christine Owens runs the group.

CHRISTINE OWENS, Executive Director, National Employment Law Project: They accounted for 39 percent of job growth in the recovery. Four out of every 10 jobs that were added were in those three very-low-wage industries.

PAUL SOLMAN: According to this same study, all low-paying industries accounted for less than a quarter of job losses during the recession, but they have accounted for almost half of job gains since.

Put simply:

CHRISTINE OWENS: We have gained far more jobs in low-wage industries than we did in mid-wage and high-wage industries.

PAUL SOLMAN: In May, for example, some of the biggest job gains were in health care. Seems promising. Yet many of those jobs are low-paying.

CHRISTINE OWENS: Jobs like home care. Home care is one of the fastest-growing jobs in our economy and it is the job that is expected to grow the most over the next 10 years. It pays poverty wages.

PAUL SOLMAN: Paul Osterman elaborated.

PAUL OSTERMAN: Health care is a very bifurcated, polarized industry. You have got the doctors and nurses at the top. You have got the home health care aides. You have got the CNAs, the certified nursing assistants, at the bottom. Those bottom jobs are going to grow immensely because of the retirement of the baby boom, because of the demand for home health care. And so a growth in health services, while expected, doesn’t necessarily lead to better jobs at all.

PAUL SOLMAN: Consider the entire economy, says Osterman, and what the average job has been paying.

PAUL OSTERMAN: If you look at wage growth in the economy, over the last 12 months, it’s been about 2.1 percent. That’s barely ahead, barely ahead of inflation, so people are not getting ahead in terms of their earnings in this recovery.

PAUL SOLMAN: And if you look at where so many of the new jobs cluster, in non-supervisory work, today’s employment report says that wage growth actually trailed inflation over the past year.

The bottom line for May, then: more workers and more jobs, but not necessarily the kind of jobs that signal anything like a robust recovery.

JUDY WOODRUFF: Paul details more employment numbers online, including the under-reported stat of those not in the labor force, but say they want a job. See how high that has risen on Making Sense.