Jobs report underestimates underemployed
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Growth is happening in the wrong places
The market’s upbeat reaction to Friday’s tiny improvement in unemployment suggests that this is an economy on the mend.
The reality is far less sunny.
In fact, low-paying jobs that are being created will keep the recovery moving at a snail’s pace and will be a drag on wages for some time to come.
“Quality matters as much if not more than quantity, and the quality of jobs we are generating is abysmal,” says Diane Swonk, chief economist at Mesirow Financial.
In June, the Labor Dept. reported that nonfarm payrolls rose by 195,000, ahead of expectations. The unemployment rate held steady at 7.6%, failing to dip a hair as economists had predicted to 7.5%.
People working part time, referred to as “involuntary part-time workers” because their hours had been cut or they were unable to find full-time work, rose by 322,000 to 8.2 million.
That reflects a disturbing trend in this recovery that the recent job growth has come in sectors that tend to be low-paying, such as leisure, retail and hospitality, and in temporary work. At 7.6%, the rate of joblessness is a striking improvement from the 10% rate of four years ago, but it is still uncomfortably higher than the average 6% unemployment rate for the 24 years before the recession started.
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