The US labour market is worse than it looks
The New York Times has an odd story today, "Is a Lean Economy Turning Mean?" which discusses how conditions for workers have become dire. New jobs are scarce, and many of the ones out there don't pay as well as what employees got in previous roles. Hello, downward mobility.
What makes the piece peculiar is that the Times seems to have woken up just now to the idea that the labour market has been difficult for the last few years. It's been common for the media to follow the headline unemployment stats, when those are have considerable shortcomings. The self-employed (who may in practical terms may be severely underemployed) and part-timers are counted among the employed, but the most serious failing in the official unemployment release is the numerator, how unemployment is defined.
As Walter Williams at Shadow Stats noted:
Up until the Clinton administration, a discouraged worker was one who was willing, able and ready to work but had given up looking because there were no jobs to be had. The Clinton administration dismissed to the non-reporting netherworld about five million discouraged workers who had been so categorized for more than a year. As of July 2004, the less-than-a-year discouraged workers total 504,000. Adding in the netherworld takes the unemployment rate up to about 12.5%.
I have not gone trolling for an updated estimate of how large the pool of discouraged workers is, but table in the Bureau of Labor Statistics Household Survey, "Alternative measures of labor underutilisation" sheds some light (click for larger image),
It shows raw underutilisation of 9.9% and seasonally adjusted underutliization of 9/0% as of January 2008. That seems more consistent with the lack of labor bargaining power in the economy:
The Times indirectly acknowledges the limitations of the unemployment stats by looking at labor utilisation and finding a downtrend there.
But the bigger question is: why hasn't this gotten more notice sooner? It's widely acknowledged that inflation adjusted wages have been stagnant since the 1970s. And even in a nominally robust economy like New York City, the white collar cohort not working on Wall Street has been squeezed. Everyone I know in a firm or corporation is doing 50% more than they were expected to do a decade ago, and they certainly aren't earning 50% more in real terms or even nominal terms. (And the 50% is not an exaggeration: I know quite a few people who are single-handedly doing what was formerly two jobs at their company).
Plus we have a culture where many white collar workers are expected to be on call virtually all the time, which both extends the number of hours worked and adds to stress. Yet few have wanted to see these developments as a sign of the falling standing of workers.
Click here to read the New York Times article: "Is a Lean Economy Turning Mean?"
Posted by Yves Smith on his Naked Capitalism blog, 2/3/08
