The Bureau of Labor Statistics today reported that total employment grew by 215,000 jobs in November. At the same time, the unemployment rate remained unchanged at 5.0 percent. New jobs are certainly welcome, but it is crucial to keep this employment growth in perspective. For this business cycle, i.e. since March 2001, the labor market performance is still too weak to allow middle-class families to escape the debt trap.
Total employment growth has been the lowest of any business cycle. On average, employment has grown by 0.02 percent per month since March 2001. The business cycle with the next slowest employment growth ended in August 1957 and had average employment growth that was more than four times as fast. Only seven months in this business cycle, out of 56, have seen above average employment growth. That is, for 87 percent of this business cycle, employment growth has been below average. November 2005 had employment growth of 0.16 percent, which remained still below the long-term average of 0.18 percent before this business cycle.
A silver lining on the employment horizon is the fact that jobs have expanded across a rather broad spectrum. Construction, manufacturing, and many service sectors, such as health care, added jobs in November. Also, jobs related to the construction and housing boom – construction, architects, real estate agents, mortgage bankers, and sales personnel in building supply stores – accounted for 24.1 percent of November's employment gains. For the time being, this signals good news since three-quarters of the employment gains are not directly dependent on the performance of the real estate market, which many observers expect to weaken in the coming months.
However, families need more jobs and higher wages to make ends meet. Inflation-adjusted hourly wages were about as high in October 2005, the last month for which data are available, as in March 2001. Inflation-adjusted weekly earnings in October were 0.7 percent lower than in March 2001. Today's figures from the BLS show wages continued to be flat or even lower than at the start of the business cycle in November. Hourly wages for production, non-supervisory workers, the vast majority of workers, rose by 0.2 percent, while weekly earnings actually fell by 0.1 percent, before the effects of inflation are even taken into account.
Importantly, without stronger, prolonged, broad based employment growth and a clear turn around in wages, middle-class families will continue to struggle under a mountain of debt amassed over the past few years. In the second quarter of 2005, the last period for which data are available, households had to spend a record 13.6 percent of their disposable income to service their outstanding debt. In the third quarter of 2005, all banks reported that the ratio of consumer loans, including credit card debt and other consumer loans, that were in default rose to over 3 percent for the first time in more than two years.
Christian E. Weller is Senior Economist at the Center for American Progress.