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Labor Market Unease Unlikely to Go Away Soon

March's unexpected 308,000 new jobs beat Wall Street estimates. The new jobs were spun as evidence that the job market had fully recovered. Yes, the growth was well over the required monthly increase of 150,000 new jobs needed to accommodate natural growth in the labor force (e.g., new high school and college graduates). However, we must be careful not to over spin the number.

First, one month does not make a trend. Second, just before the release of last month's employment numbers, our Workforce Development Center captured for the second time in its national Work Trends survey the opinions of workers and employers on a variety of economic and workforce policy issues. The survey, conducted in February and March of this year, revealed that for the last three years workers believe they have been left to their own means to cope with the recession and job loss recovery, and that unease, not optimism, is the dominant feeling of the day. Because these sentiments are so strong, even if at the time of the interviews workers and employers had known that an unexpected 308,000 new jobs had been created, we find it hard to believe that this single month of unexpected growth could erase their experiences from the last three years.

Why do we make this claim? Our report revealed that more than half of the labor force is very concerned about the job security of those currently working—the highest number since the survey series started in 1998. Two-thirds of workers feel now is a bad time to find a quality job—three years ago only 16 percent felt this way.

What created this pessimism and lack of security? Simply put. The workers' own experiences. Lay-off notices became a reality for one out of every five workers at some point during the last three years, and of those who were lucky enough to escape layoff themselves, one third worked with someone who wasn't. No wonder people are reluctant to buy into the idea of recovery—more than half (54 percent) of current workers think there are no steps they can take to reduce the likelihood being laid-off over the next three to five years. To our surprise, employers are even more pessimistic—fewer than 30 percent believe they can reduce the probability of having to lay people off in that same time period.

Most economists agree that layoffs are a feature of a capitalistic economy. Labor must be deployed in the most efficient manner. Workers on Main Street understand this economic tenet, but they want and deserve greater assistance when they lose their job and it is no fault of their own. Why? While most become re-employed, many are frequently in a job significantly different—and often worse—than the one they lost. Half earn less in their new job than they did before, and for workers with at least some college education, wage recovery is even more unlikely. We also report that one in four laid-off workers return to work in a part-time job.

While some services to assist workers in finding comparable reemployment exist—"buying time" through unemployment insurance benefits or money for education and training, for example—these often end up missing their targets. Only about 25 percent of those laid-off were able to enroll in education or training while unemployed, although 43 percent of those who participated said it helped them find a new job.

Although workers and employers each place the primary responsibility for finding a new job on workers themselves, both groups agree that the government can do a better job in assisting workers. This is supported by the findings that one in three workers believe President Bush is doing a poor job handling issues related to jobs, compared to only 7 percent who find his performance to be excellent. When asked which major political party is doing a better job in Congress with job issues, more than half said neither one was. These are not uninformed cries for help based on unlimited funds—recall the Money magazine poll released earlier this month showing that 76 percent of those surveyed would have preferred that the resources devoted to the tax cuts instead been allocated directly towards job creation.

The dislocations over the past three years reflect structural changes that have been occurring for several decades. The fact that the losses are part of a larger reconfiguring of how Americans work, where Americans work, with whom Americans work, and when they work, does not mean that nothing can be done. Successfully managing an economy in the 21st century is not just about making GDP rise, it is about helping workers and employers navigate the uncharted waters. It is about giving workers reasonable advance notice of a layoff, severance pay, job search assistance, extended unemployment insurance benefits, and when necessary the opportunity and resources to retool and augment their skills. From where do these common sense approaches originate? From the workers in our survey. Workers have a clear vision of the tools they need in order to be competitive in the "new economy" and policy makers must pay more attention to their ideas.

Next Friday's report on April job creation will hopefully provide a useful signal as to the labor market's direction. Even with last month's unexpected increase in jobs, the market's consensus forecast is still the creation of 150,000 to 175,000 new jobs, right around the amount needed to keep up with population growth. This forecast clearly means that the private sector also remains cautious about the economy. For workers it unfortunately means more of the same, continued difficulty finding employment. So don't expect that the almost 18 million Americans- including 8.4 million unemployed, 4.8 million out of the labor force, but who want to work, and 4.6 million working part-time for economic reasons – who comprise an untapped pool of potential to fall.

Yet, even if private sector forecasters are wrong again and the economy gets a second consecutive month of unexpected growth, which finally ushers in a new period of robust growth, according to the sentiments of those we surveyed, the growth will not be strong enough to erase the memories of living with 3 years of weak policy initiatives to create robust job growth and recent meager attempts to help workers cope with the 29 month "job loss" recovery.

  • Concern about Economic Issues: Workers v. Employers
    Worker confidence in the economy is low, with 51% very concerned about job security and 44% very concerned about the unemployment rate. Both these measures are at their highest value since the start of the Work Trends series in 1998. Although employers are less concerned about the economy than workers, a majority (53%) of them still believe now is a bad time to find a quality job.
    Source: Dixon, K.A., Rodgers, III, W.M., Van Horn, c=E, Laid Off: American Workers and Employers Assess a Volatile Labor Market, Rutgers, NJ: John J. Heldrich Center for Workforce Development
  • Incidence of Layoffs, by Income
    Exposure to layoffs has cut across income levels. While workers earning less than $40,000 per year are more likely to have been laid-off than those earning more than $40,000 annually (27% v. 14%), members of the higher income group are much more likely to work in a firm where others were laid off (36% v. 22%).
    Source: Dixon, K.A., Rodgers, III, W.M., Van Horn, C.E, Laid Off: American Workers and Employers Assess a Volatile Labor Market, Rutgers, NJ: John J. Heldrich Center for Workforce Development
  • Earnings after Reemployment, by Education Level
    Although most dislocated workers have returned to work, half of this reemployed population now earns less than they did before being laid off. This drop in wages is more likely for those with schooling beyond high school–58% of workers with some college education report earning lower wages in their new jobs.
    Source: Dixon, K.A., Rodgers, III, W.M., Van Horn, C.E, Laid Off: American Workers and Employers Assess a Volatile Labor Market, Rutgers, NJ: John J. Heldrich Center for Workforce Development

William Rodgers III is a professor and chief economist and Scott Reynolds is the project coordinator of the Heldrich Center for Workforce Development at Rutgers University. Rodgers III is co-author of "Laid Off: American Workers and Employers Assess a Volatile Labor Market" and a member of American Progress' academic advisory committee on economic policy.

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