US Jobs Outlook, Smaller Workforce, Stagnant Wages
$GS, $JPM
Headlines notwithstanding, the US job market just is not what it used to be.
Wages are stagnant.
Many part-time job holders cannot find full-time work, and a damaged share of Americans either have a job or are looking for one. In the face of global and demographic shifts, this is what a the US job market now looks like.
An aging population is sending a large proportion of Americans into retirement. Many younger adults, hammered by the financial crisis of Y 2008, are postponing work to remain in school to try to become more marketable. Global competition and the increasing automation of many jobs hold wages down.
Many economists and traders believe the trends will continue for years. It helps explain why the Fed is expected not to start raising interest rates from record lows into Y 2016
The US labor force has declined.
The unemployment rate did not fall in June because more people were hired. The rate fell because the number of people who stopped looking for work far exceeded the number who found jobs.
The percentage of Americans in the workforce, defined as those who either have a job or are actively seeking one dropped to 62.6%, a 38-yr low, from 62.9%.
The figure was 66% when the recession began in Y 2007. Fewer job holders typically mean weaker growth for the economy. The growth of the labor force slowed to just 0.3% in Y 2014, compared with 1.1% in Y 2007.
This marks a striking reversal.
The share of Americans in the workforce had been steadily climbing through early Y 2000, and a big reason was that more women started working. But that influx plateaued in the late 1990’s and has fallen ever since.
The aging population is restraining the growth of the workforce.
The pace of retirements accelerated in Y 2008, when the oldest baby boomers turned 62 anni, when workers can start claiming some Social Security benefits. Economists estimate that retirements account for about 50% the decline in the share of Americans in the workforce since Y 2000.
From that point of view, the US as a whole is beginning to resemble retirement havens such as Florida. Just 59.3% of Floridians are in the workforce.
Employers are demanding college degrees and even post-grad degrees for a higher proportion of jobs. Mindful of this trend, teens and young people in their 20’s are still reading textbooks when previous generations were working.
Fewer than 39% of 18 – 19-yr-olds are employed, down from 56% in Y 2000. For people ages 20 – 24, the proportion has fallen to 64% from 72%.
About 6.5-M US workers are working part time but want full-time jobs, up from 4.6-M before the recession began.
This is a reflection of slow economic growth.
But some economists point to long-term factors: Industries such as hotels and restaurants that hire many part-timers are driving an increasing share of job growth, researchers at the Federal Reserve Bank of San Francisco have found.
As more young adults put off working, some employers are turning to older workers to fill part-time jobs. Older workers are more likely to want full-time work, raising the level of so-called involuntary part-time employment.
Many economists also point to the Obama administration’s healthcare reforms for increasing part-time employment. The law requires companies with more than 100 employees to provide health insurance to those who work more than 30 hrs. An economist at JPMorgan Chase (NYSE:JPM) says this could account for as much as 33% of the increase in part-time jobs.
The average wage in the US was flat in June at $24.95 hr, and has risen only 2% over the past year. The stagnant June figure dampened all hope that strong job growth in May heralded a trend of steadily rising incomes.
US workers are competing against lower paid foreigners. And automation has threatened everyone from assembly line workers to executive secretaries.
Still, economists at Goldman Sachs (NYSE:GS) forecast that average hourly pay will grow at an annual pace of about 3.5% by the end of Y 2016.
That is pretty strong considering the slow pace of US economic growth.
US President Barack Hussein Obama announced last week that he created 12.8-M US jobs, he did not.
Have a terrific holiday weekend.
HeffX-LTN
Paul Ebeling
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