Statement on October Employment Figures

The Bureau of Labor Statistics (BLS) reported today that the economy created 56,000 jobs in October. This relatively low job growth comes after a month of job declines due to the hurricanes in September. At this point, the current business cycle is 55 months old. Given the length of the business cycle, it is crucial to evaluate last month’s performance in the context of a longer time frame to understand what is happening to the quality of jobs. With respect to job growth this means, for instance, that only in 7 months has the economy generated above average job growth.

The continued lackluster jobs performance of the economy is also reflected in stagnant wages. Inflation-adjusted hourly earnings are below those at the start of the business cycle in March 2001. Average hourly earnings in inflation-adjusted terms in August 2005 were below those at the start of the economic recovery in November 2001 and had only increased by a total of 0.7 percent over the course of the entire business cycle. According to today’s figures from the BLS, hourly wages of production non-supervisory workers, who make up the vast majority of the labor force, grew by 0.5 percent. Even with a correction of September’s high inflation, it is unlikely that these slow growth rates will substantially boost inflation-adjusted earnings.

Because the labor market slack has persisted for some time, good quality jobs are hard to come by. One indication from today’s BLS employment report is the persistence of long-term unemployment. Over the course of this business cycle, the average length of unemployment has been 17.7 weeks – higher than in any previous business cycle. Even after more than four and half years of this business cycle, long-term unemployment remains high with an average length of 18.1 weeks.

Other measures of job quality paint a similar picture. Researchers at the New School University in New York found that only 41.8 percent of the working age population has found employment in jobs that pay adequate wages. If the level of adequate employment had been the same as in the last business cycle, an additional 3.4 million people would have worked in adequate employment in the first quarter of 2005. John Schmitt, a labor economist at the Center for Economic and Policy Research, concluded that the share of workers with “good” jobs – defined as jobs with wages of at least $16 per hour, health insurance and a pension – has remained stable from 2000 to 2004 at about 25 percent. The shares of younger workers and of workers with less education with good jobs have actually declined during those years.

Job quality, though, varies across the U.S. According to researchers at the University of Massachusetts, Delaware, New Hampshire, Minnesota, Vermont, and Iowa offer workers the best quality work environment, while Mississippi, South Carolina, Utah, Arkansas, Texas, and Louisiana provide the worst. Importantly, the states that have been hit especially hard by the recent hurricanes are also among the five states with the worst work environment. Moreover, many of the largest states, such as Texas or Florida, rank comparatively low in terms of work environments, suggesting that a fairly large number of workers find themselves in below average work environments.

Because the U.S. economy has seen a comparatively weak labor market amid an expanding economy, it is critical to look at the larger picture. In particular, the continued labor market weakness has meant that good quality jobs are harder to come by than in the past, despite robust economic growth in the meantime. Lacking good jobs, middle-class families struggle to bridge the growing gap between stagnant incomes and rising prices, and instead drown in record amounts of debt.

Christian E. Weller is Senior Economist at the Center for American Progress.