Pethokoukis, Economics, U.S. Economy

Waiter and waitress nation: The May payrolls report shows the US creating jobs, just not many good ones

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The headline numbers for the May jobs report are about what you would expect for a New Normal economy stuck in 2% growth mode: 175,000 net new jobs last month, the unemployment rate ticking up to 7.6%. No broad signs of acceleration; just the opposite, in fact. As Barclays bank points out, the three-month average increase in nonfarm payrolls through May is now 155,000 vs. a first-quarter average of 207,000. (And at May’s pace of job creation, it would take another 58 months to get back to 5% unemployment.)

In addition, hours worked grew at a 1.9% annualized rate in April and May versus the 3.6% growth seen in the first three months of the year. This downshift reflects a slowing in GDP growth. The bank’s tracking estimate for real GDP growth in the second quarter stands at 1.2%, down from 2.4% in the first quarter.

And what kind of jobs are being created? As economist Dean Baker of the Center for Economic and Policy Research points out, job growth was again narrowly concentrated, with the restaurant sector (38,100 jobs), retail trade (27,700) and temporary employment (25,600) accounting for more than half of the job growth in May. Baker: “These are all low-paying sectors. It is worth noting that the job growth reported in these sectors is more an indication of the weakness of the labor market than the type of jobs being generated by the economy. The economy always creates bad jobs, but in a strong labor market workers don’t take them.”

Indeed, restaurant jobs make up just under a tenth of total US nonfarm jobs, but they accounted for more than a fifth of the jobs created last month.

Another sign of internal labor market weakness: the underemployment rate of 13.8% — which includes part-timers who would prefer full-time work — remains more than six percentage points above the “real’ unemployment rate. Before the Great Recession, that gap was typically less than four points. Indeed, 5.7% of US nonfarm workers are now “part-time for economic reasons” — either their hours were cut back or they can only find part-time gigs — vs. 3.2% precession.

No wonder we’re getting anemic wage growth. JPMorgan: “Wage gains remain pathetic, as average hourly earnings were unchanged last month. … After ramping up late last year and early this year, the trend in labor income is cooling off a bit, as total private wages are increasing at a modest 2.9% annual rate in the three months ending in May.”

Possible suspects include Obamacare, automation, and weak labor demand. Several other observations:

1. The labor force participation rate ticked up to 63.4%. If that rate were back to where it was in January 2008, the unemployment rate would be 11.4%. Even assuming for demographics like the aging of the population, a normalized unemployment rate would be over 9%.

2. The share of the adult population that’s employed remained stuck at 58.6%. While the unemployment rate has fallen over the past 3½ years to 7.6% from a high of 10%, the employment-to-population ratio has risen only from a low of 58.2% in 2011 vs. 63.4% pre-recession.

3. As the below chart shows, the official unemployment rate remains far above what Team Obama predicted back in 2009 if Congress passed his $800 billion stimulus plan:

romerbernsteinbasemay

 

30 thoughts on “Waiter and waitress nation: The May payrolls report shows the US creating jobs, just not many good ones

  1. Almost half (194K) of BLS’s vaunted 420K increase in the workforce was teenagers. Those are seasonally adjusted numbers, so their appearance in time to look for summer jobs is far greater this year than in past years.

    16-19s took 125K of the Household Survey’s 319K job adds. The combined M-W 20+ not in labor force number barely budged.

    • The unemployment rate for those in the 18-29 age bracket rose 0.1% to 11.6%. 2 million more are entering the labor force this month.

  2. “restaurant jobs”. The majority of jobs in the restaurants are done, stereotypically, by dish dogs and line cooks. Those jobs, unsurprisingly, are done by immigrant labor.

    So, again, Jim, we come back to the same point – that immigrants benefit from these new jobs, while the social costs of us having them here are borne by taxpayers – while the owners of the restaurants – corporations, celebrity chefs, (i.e. the rich) benefit. Management wins with lower wages and society loses w/ higher costs to healthcare and education. Woo!

    Since 1986, it has been estimated that 25M Central Americans (primarily Mexicans) have emigrated to the US. You talking about restaurant jobs (waiters and waitresses) w/o mentioning the typical ethnicity of backroom workers is shameless.

    Those jobs used to be filled by teens and young workers as their first jobs to pay for college. Now they are destination jobs for illegals. Labor shortages lead to higher wages for workers. Even purported economists like yourself know that.

    • I am inclined to agree, although I do have to say, I’d care a lot less about who was working in the kitchen if the economy was growing at 5% rather than 2.

      I’ve never understood how you can put 6M Americans back to work and/or import 1-2M or more new immigrants per year without a proportional increase in the capital stock, now at approx $250k per job.
      Otherwise, wages must fall proportionately, right?
      Perhaps Jimmy P has expounded on this before?

    • Very good point… Illegals have also found jobs in the construction industry for the past twenty years. Used to be that the construction industry provided jobs for youth right out of high school and did not require college education. After working several years in construction, some entrepreneurs would start their own firms. Opportunities in the construction industry for our youth seem to have been lost.

    • First, Mexico is in North America.
      If we did away with minimum wage laws, something I favor, the hourly wages for many low skill jobs would fall. If there are people willing to work for next to nothing and want to come to the US, let them come.
      It’s only a problem because we are turning into a welfare state. Fix that and we’ll be better off.
      All things being equal, I’d rather have my teenage sons get a job doing something other than a minimum wage job. I know they exist because my son has one of those jobs right now: Lifeguard at $11 – $16/hour.

  3. thank you James for mentioning the healthcare bill

    headwinds/concerns for businesses in the Affordable Care Act that likely impact quality and quantity of jobs created

    - regulatory compliance costs
    - new taxes
    - mandates
    - implicit uncertainty
    - higher healthcare costs (more a concern for younger/healthier employment groups)

  4. From Instapundit.com:

    UPDATE: A reader email: “Remember when Bush was president…..and Liberals derided the jobs being created as ones ‘flipping burgers?’ Amazing how their current position on the political power food chain colors some people’s perceptions.” Yes, those were called McJobs.

    Posted at 8:00 am by Glenn Reynolds

  5. Canada’s numbers where also released. 95,000 jobs created in May. That’s the equivalent of 900,000 jobs in the US economy.

    I’m sure our CONSERVATIVE government and Prime Minister have nothing to do with it. Just luck really.

      • To be a conservative in Canada is more liberal than most democrats in the U.S.

        Note that it was the Liberals who cut spending and reduced the deficit as Paul Martin the son reversed the sins of Paul Martin the father. Both parties in the US are more fiscally reckless than the mainstream Canadian parties.

        • I live in Canada. One of the reasons we create ao many jobs and have a strong ecpnomy is because we produce and export a alot of oil and the goverment keeps their hands of it. We have left wing federal parties like the NDP ready to go in there and mess it up. Most of the oil is from the very conservative province Alberta. We also don’t have millions of illegal immigrants living off the system like the US.

          • I live in Canada too and see you as being a bit naive. When a supposedly conservative Albertan Prmier Edward Stelmach nearly ruins Alberta’s economy by hiking royalty rates it is hard to spin the action as anything but anti-business and anti-jobs. The government of British Columbia just killed the idea of a pipeline to the coast and it looks as if the government of Quebec will be doing the same thing. There are still far too many lefty socialists in all of the parties and little hope that you will see individual liberty respected in Canada. The saving grace is incompetence on the part of the government and a lack of resources to turn into the type of surveillance state that our neighbour to the south has turned out to be. At least Americans have a tradition of liberty that may be revived. Unfortunately, we do not have that tradition and it is far less hopeful here that we could rise to the same heights as Americans once did. Fortunately, we are far less likely to sink to the same depths.

  6. I don’t understand how the Administration and it’s supporters can look at over a million first time applicants for unemployment benefits per month vs. 175,000 new jobs for May and say the economy is improving. Am I missing something?

    • Am I missing something?

      You are. With fiat currencies threatening to collapse across the board we need the reported data to get people excited about the economy and set up the gold markets for another fleecing. The problem, of course, is that to prop up the equity markets and the currencies you need to release information that will harm the bond markets. That will mean that some time in the next few months we will get another reassurance that the QE operations will continue and even more individual will leaving the markets across the board and begin hoarding ‘cash.’

      The problem is that the game cannot keep going forever. If the bubble in equities continues to inflate the bond market will break and that will cause rates to go up and create another large market crash. If the Fed persists in buying treasuries to keep bond markets stable even as equities go up the level of resentment among the jobless will create discontent that will show up as protests and possible violence in many economically weak areas of the country. Eventually the uncertainty will drive cash into unconventional markets where the money flows will create huge explosions to the upside and yet more bubbles that will end badly.

      From what I can tell the government is desperate and will lie as much as it can to hide the real picture from voters and investors. But what it cannot do is hide voters and investors from the consequences of that reality.

    • No fan of the admin but — this is always the case. Unemp claims, while a good indicator, generally run at least 200M per week in a good economy growing 3-5% and adding 350M jobs per month. Every month the economy adds and subtracts about a million to 1.5 milion jobs per month. Hopefully the adds are more than the losses from the survey of employers. Most of the 350M per week first time claims of Unemp claims are in the “losses”. Also a lot of other statistical noise in data, seasonal adjustments, birth-death adjustment etc.

  7. What happens when the interest rates rise, the value
    of the dollar falls, and the jobs in the Consumer Economy and the Service Economy evaporate ?
    All those people must be fed, housed, and clothed _somehow_.

  8. We could start to enforce our existing immigration laws. That would shrink the labor pool and drive down the UE rate. It would also raise wages for the lowest skilled workers in our economy.
    Enforcement could be done quite easily, remember that every employer sends electronically a report each quarter to both the state and federal governments with the name SS# and wages of every employee. If that was eVerified we could probably get 15 to 20% of the illegal workforce out of the picture.
    We can intercept 3 billion phone calls, but we cannot check reports sent electronically by employers?
    Here in FL, they checked the UTC 6 Fillings for one quarter. They found over 500,000 incorrect submissions, with over 10,000 SS#s being submitted more than five times each.

  9. I remember reading this about Britain four years ago…the nation of service employees. It is ALL down hill from here. Thank the people who voted for Obama for our demise!

    • The “rentier” class. Those who make their money off of big government (big bankers, bureaucrats, lawyers, accountants and “consultants,” including lobbyists) are doing quite well. Pretty soon we’ll all be working for them.

  10. Restaurants are hiring waiters because there are more people buying food at there establishments. There are more people buying food at their establishments because consumer confidence has grown to its highest level in years and incomes are growing.

    • Restaurants are hiring waiters because there are more people buying food at there establishments. There are more people buying food at their establishments because consumer confidence has grown to its highest level in years and incomes are growing.

      This is nonsense. A record number of Americans are now on food stamps and the real median wage is not going up. If we count all the unemployed we are still looking at a rate of more than 20%. Not only are there more unemployed they are staying unemployed for much longer. And for all those that take all of these ‘adjusted’ reports seriously let me point out that the number could be 129,000 higher or lower than the number reported. Sorry folks but there is nothing to get excited about. Look for the Fed to try to stop the slide in the bond market. That would require a different type of report.

  11. There are two kinds of food service worker:

    First, there is the single Mother

    Second, there is the college graduate with the $150 thousand dollar student loan to pay!

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