Part Time Jobs Do Not Support A Strong Economy
The headlines report that the US economy is churning out a lot of jobs in here, but little financial security for the majjority of the people who hold them.
Pay growth remains slight.
There are very few opportunities for most to advance. Others have taken temporary, or freelance jobs, with little chance of landing full-time permanent work with any of the benefits most have learned to expect.
That being the case many jobs do not deliver as much economic punch as they have in the past.
Part of the reason is that US workers have grown less efficient in recent months, because when they produce less per hour of work, their earnings power shrinks. So the economy does not benefit from the money that healthy job growth has provided in the past.
The result is a disconnect between the high number of job gains and the chronic dissatisfaction job holders and job seekers.
More people are working part-time jobs. They are not life-supporting jobs.
Last Friday, the US government reported that the economy added a solid 280,000 jobs. The unemployment rate ticked up slightly to 5.5%, but for a positive reason: More people decided to start seeking a job, and some, many if not most did not find one.
Hiring surged in the healthcare, retail, construction and hospitality & leisure sectors. Many analysts and investment managers cheered as average hourly wages rose at an annual rate of 2.3 from 2.2% in April, slightly ahead of the Fed’s skewed gauge for inflation.
The data alone does not tell the story
Nearly 50% of Americans say they could not afford an emergency expense of $400 without borrowing or selling something they own, according to a survey released by the Fed. And 60% of those surveyed said they expect to go without a pay raise over the next 12 months.
One reason the number of new jobs has stayed strong despite sluggish economic growth is that workers are becoming less efficient. Lower productivity can force employers to hire more people in the short run. But it also holds down pay. Higher productivity allows employers to pay more without having to raise prices on their products.
But productivity, which measures output per hour worked dove by a 3.1% annual rate in Q-1 of Y 2015 after a 2.3% fall in Q-4 of Y 2014. It was the 1st time in more than 8 years that productivity had fallen for 2 Q’s running. Productivity had expanded 2.1% annually, on average, since Y 2000.
Since the Great Recession, companies have been slow to invest in machinery, computers and other equipment that would enable their workers to produce more.
Over the long term, the absence of productivity growth is bad for workers and firms alike.
Many of the jobs added since the Great Recession ended in Y 2009 have been part time in low-paying industries. Those jobs have far less economic impact. Nearly 6.7-M part-timers would prefer full-time work, that number is far above the pre-recession mark of 4.6-M.
The number of self-employed has also jumped nearly 1.6-M in the past year to 16.2-M, nearly back to pre-recession levels. The self-employed include independent construction contractors and high-priced consultants, and freelancers who struggle to get by. Growth in those areas suggests that more Americans are cobbling together livelihoods from piecemeal work.
The data show that the number of freelancers rose to 17.9% last year from 15.9-M in Y 2011. The desire of companies to limit costs is driving a shift toward contract and freelance work.
New online platforms that link freelancers with projects have facilitated the process.
Many freelancers value the flexibility. But such jobs provide few or no benefits and require independent workers to track and pay taxes on their own.
A report by Congress’ Government Accountability Office (GAO) found that independent workers in this recovery endure greater job instability and lower incomes than full-time permanent workers.
Have a terrific week.
HeffX-LTN
Paul Ebeling
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