Tuesday, September 11, 2012

The Few New Jobs We're Adding are in Large Measure Low Paying Jobs

Not enough new jobs are being created. That's not news.

However, of those jobs being created, they're generally of the low paying variety. That's not good news.

Many New Jobs Created in Low-Wage Industries says this:

"Since bottoming out in February 2010, the U.S. economy has added about 4.6 million private-sector jobs. That’s the good news.

The bad news is that it’s not nearly enough to make up for the 8.9 million wiped out during the recession. And many of the new jobs are in industries that have less-than-stellar wages.
Since hitting a trough in February 2010, most job gains have come in professional and business services (1.4 million), education and health services (961,000), and leisure and hospitality (735,000), according to the Labor Department.

Wells Fargo senior economist Mark Vitner dives deeper into the numbers and finds that nearly 40% of the private sector jobs added since February 2010 have been in retail trade, leisure and hospitality, temporary staffing and home health care.

“While these industries employ workers at a wide variety of pay grades, weighted average hourly earnings for these four industries total just $15 an hour. Moreover, many of these jobs are part-time and carry only limited benefits,” Mr. Vitner wrote in a research note.

By comparison, average hourly earnings for all private-sector employees were $23.52 last month, Labor said.

That corresponds with weak overall wage growth. Over the past 12 months, average hourly earnings have increased by a measly 1.7%, barely enough to keep ahead of the 1.4% inflation rate.

And that in turn is holding back consumer spending, which accounts for about two-thirds of the economy.

“The lack of real income growth is a major factor preventing the economy from achieving the escape velocity,” Mr. Vitner wrote.

The graph attached shows the correlation between disposable income and consumer spending–they usually move in lockstep. So until Americans start earning more money, don’t expect them to start spending a lot more."

Summing Up

It ain't pretty and won't get prettier for some time to come.

At least that's the way I see it.

Thanks. Bob.

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