The Jobs Report Isn’t an Effective Metric for the U.S. Economy
Looking at the March jobs report, you’d think February’s report was just a blip. As it turns out, everything is just fine … at least, that’s what you would believe if you just skimmed the headlines: “blowout jobs report,” or the insightful “JOBS! JOBS! JOBS!”
So what was so great exactly? 196,000 jobs were added compared to just 20,000 in February. Unemployment remained at 3.8%. Wages increased 3.2% year-over-year. If you’re upper or upper middle class, this might jibe with your personal economy. But for the rest of Americans living outside of the middle class, their economy probably doesn’t quite match up with the experience suggested by the jobs report.
The reality is that people are struggling. Especially minorities and younger generations.
Of course, anecdotes aren’t the same as data, but the truth is you’re not seeing all of the data. The headlines of the jobs report and the nonsense from our president only tells a small sliver of the story. Nothing stated in the jobs report is untrue, but it is reported in a way that emphasizes the success of those at the top while minimizing the struggle of the lower classes.
Drilling Down Into the Jobs Report
The big headline of the March jobs report was 196,000 jobs being added while unemployment held at 3.8%. That’s good, right? More jobs mean more people can work, and with so few unemployed, people have more choices of where to work.
Except there’s some information missing from those headlines, even within .
Looking at household data rather than jobs data, we see a few interesting things let’s start with the unemployment rate.
The ‘Real’ Unemployment Picture
The number of employed people in March went down 201,000 while the number of unemployed also went down 24,000 and the unemployment rate held steady. How does that make sense?-
To understand this, we need to look at the Bureau of Labor Statistics’ (BLS) . Following this link, you’ll see six definitions, U-1 through U-6. The 3.8% unemployment reported comes from U-3, which is defined as “total unemployed, as a percent of the civilian labor force.”
The labor force is defined by the BLS as the sum of the employed and the unemployed. This excludes people the BLS deems don’t want to work. A lot of exclusions make sense — like the elderly and students. However, the labor force rate also excludes anyone who hasn’t . Even if they want to work but have given up trying or other obligations have gotten in the way. They are counted among the “marginally-attached” labor force if they meet certain criterion.
Looking back at the labor utilization definitions, we also have definitions U-4 through U-6. These include marginally-attached workers (people who are available to work and have looked for work or been employed in the past 12 months) and discouraged workers (a subset of the marginally attached who have stopped looking for work because they believe they can’t find a job for any number of reasons to do with the job market itself).
U-6 also includes people who would like to work full time but are only able to find part-time work. This rate is 7.5%. While this has gone down since the recession, it’s still not a pretty number for headlines.
In the March jobs report, there were 369,000 fewer people in the labor force than February. That’s how the unemployment rate held steady even as fewer people were employed.
Should we be counting people who are so discouraged by the job market that they’ve given up — possibly temporarily — as unemployed? I think so.
Should we be counting those who want to work and who are available, but because of their free time have had other responsibilities in the last twelve months? Yes.
What about those who want to work full time but can only find part-time work? This one is less clear, but I still think yes. Someone who needs to support themselves (or a family) but can only find part-time work at a fast food restaurant is not contributing to the labor force nearly as much as they want to.
Why Are People Unemployed?
Another thing the headlines don’t explore is the reasons people are unemployed and how that .
The number of unemployed people who became unemployed when they lost their jobs is down about 20,000 from February. Job leavers are down 61,000. This isn’t necessarily a good sign. A similar number of people likely do want to quit, but aren’t confident they’d find a new job quickly — so they aren’t quitting without a new job lined up.
Re-entrants to the job market is the largest group of new unemployed at over 100,000. This statistic is hard to parse. We don’t know why these people re-entered the job market. Maybe they always planned to. Maybe they’re part of what was a single income household that now can’t make ends meet. This doesn’t tell us very much about the economy.
What Types of Jobs Are Being Added?
The number of jobs added in March has been the main headline surrounding the jobs report, but is this really a sign of economic stability and growth? Let’s take a look.
First, all jobs are not created equal. Is it better for the economy to add a full-time job or a part-time job?
A full-time job of course. A person with a full-time job shouldn’t need more than that. Whoever gets that job can now support themselves — unless you’re one of the multiple-job holders just mentioned.
But the doesn’t explicitly say what kinds of jobs were added. In fact, companies aren’t required to report the number of part-time workers they have, even in their SEC disclosures.
The jobs report does state that average weekly hours went up very slightly from 34.4 to 34.5. But that doesn’t tell us much. Most people work 40 hours a week, so the number will always be around there. And people who have to work multiple jobs to get by can often work over forty hours. So it’s hard to know what is affecting this number.
Again, the household data section of the jobs report has : As of the end of March, 189,000 more people are now part-time workers for economic reasons and 144,000 are now part-time workers for noneconomic reasons.
Economic reasons include not being able to find full-time work and business conditions. Noneconomic reasons can include childcare and other family obligations and having to work while attending school. These sound economic to me. If you’re not making enough at a full-time job to pay for childcare, that’s not a good sign for the economy. Nor is having to work while you’re in school. So let’s say there’s at least a bit of overlap between working part-time for noneconomic reasons and economic reasons.
Another thing to look at is the number of people holding multiple jobs. 212,000 more people had multiple jobs in March than in February. Women are being forced to take second jobs at a significantly higher rate than men, and the number is growing: 5.7% of women had multiple jobs in March vs. 4.7% of men. This is up from 5.2% in March 2018, while fewer men have multiple jobs than in 2018. And 5.1% of people employed people in the U.S. have more than one job. Year-over-year, the number of people working a part-time job in addition to their full-time job and the number of people working two part-time jobs are .
So, 333,000 more people are employed part-time than in February. 212,000 more people are now working second jobs. Doesn’t this completely erase the 196,000 jobs added? Even if you only count those working part-time for economic reasons and those now working second jobs, that’s still 401,000 jobs that cannot support a person on their own.
Doesn’t that mean there are now 200,000 fewer jobs that give people enough money to make ends meet?
Another thing the jobs report doesn’t address is underemployment. is a measure of how well the labor force is being utilized in terms of skills. A person who wants to work full time but can only find a part-time job is underemployed. But a person with a bachelor’s degree working at a retail store, a restaurant or as an Uber driver is also underemployed. They’re not earning as much as they could be, nor are they bringing as much value to the economy as they could if their skills were being fully utilized.
The underemployment rate in July 2018 was estimated to be as . Most of these people are not acknowledged by the jobs report, and there are about 50 million of these people.
It Gets Worse
After jobs-added and unemployment, the next thing people pay attention to from the jobs report is wage growth.
Here, the picture is far more bleak.
Even the major stories on the jobs report touched on this. In March, average hourly earnings for all employees rose by 4 cents to 27.70. This is a rise of just 0.14% from February and a rise of 3.2% year-over-year vs. an expected 3.4%. I’ve seen stocks plummet for less.
But a 0.2 percentage-point miss isn’t worth panicking over right? Well, that’s just the miss from analysts expectations. Their expectations, like our wages, are exceedingly low — especially compared to the past. And the jobs report just isn’t showing the whole picture.
In March 2019, average weekly earnings for all employees on private, nonfarm payrolls came in at 955.65.
But the key word here is “average.” In common use, average refers to a specific form of calculating an average known as the . The mean average can often be influenced by outliers. For example, CEOs taking in multiple millions a year skew this average up. Using the median instead of the mean to calculate the average earnings removes the influence of the outliers.
Luckily we have this information from the BLS, just not in the jobs report. Every quarter, the BLS releases the which reports median earnings for Americans. Let’s look at the Q1 2019 release:
Over the first three months of 2019, seasonally adjusted median reported weekly income was for all full-time and salaried workers ($994 for men and $800 for women — a whole other issue). Meanwhile, the jobs report average weekly wage was $925.98 over this same period.
The jobs report number is even further off than it originally appears because it includes part-time workers in their average. Luckily, BLS did report a separate median number for part-time workers: .
Very very roughly, accounting for the proportion of part and full-time workers that brings the actual number to under $800.
Again, the jobs report average was $925.98
That’s a difference of more than 20% when using the median as opposed to the mean. That means that extremely high earners are skewing the jobs report’s wage number upwards by more than 20%. Do you think someone like Jeff Bezos should be considered when determining Americans’ average wages? Do you think he should be considered more than lower earners?
So wages are lower than they appear, and they were already being reported as the low point of the jobs report, but when you move beyond the jobs report … it gets worse.
Wage Stagnation and Exploding Costs
Based on the jobs report, Vox pointed out that “.” But it goes back much further than that.
When adjusted for inflation wages have barely moved in the last . What gains there have been have gone to the upper class.
So wages are basically the same, why are people complaining about things being harder now? If people got by then, why can’t they get by now? Don’t they just not want to work as hard as previous generations?
It feels harder to get by now because it is.
Wages have stayed the same relative to inflation, but many of our largest expenses have not. Consider most people’s largest expense: housing.
Since 40 years ago, wages are basically flat, but housing prices have risen astronomically. Inflation over that time is such that $1 in 1979 has roughly the buying power of 3.79 today. I will be using this for all of the inflation calculations. Note that all averages I use here are medians, which are not as affected by outliers as means.
First, let’s look at homeownership.
Unadjusted for inflation, the median U.S. home in 1980 was according to the U.S. Census Bureau. Adjust for inflation and $47,200 in 1980 had the same buying power as $154,220 does in 2019. So if housing prices had stayed flat, that’s what you’d expect for the average home price to be now. But it’s $226,300 — 47% higher than expected.
The effect is worse in cities. In the District of Columbia (selected so that I can use the same census data, but know I’m only looking at a High Cost of Living city), the median price of a house was $68,800 in 1980 — which would be $223,500 today adjusted for inflation if prices had stayed flat. Instead, the average home value in Washington DC is .
That means someone buying a house in an HCOL city today is paying 2.5x more than in 1980 on the same wage.
Okay fine, not everyone should just own a house, despite the traditional “American Dream” fed to all U.S. citizens. If you can’t afford to buy a house, you can rent.
Except that’s even worse.
According to the U.S. Census Bureau, in 1980, median rent was . Adjusted for inflation, you’d expect rent to average 786.20 in 2019.
Instead, the average U.S. rent in September of 2018 was . That’s 91% higher than expected. U.S. renters today are paying nearly twice as much as they were 40 years ago on the same wage.
Using DC as an HCOL city again: you have $224 median rent in 1980. That’s $727.79 adjusted for inflation. The median DC rent in September 2018 was $2170.
That’s 198% higher.
It’s now three times as expensive to rent in a major city as it was in 1980 adjusted for inflation, and wages are, once again, the same.
Okay, then why are so many people living in cities? If you can’t afford to live in a city, you shouldn’t. Live in a small town or rural area — no matter how that might decrease your quality of life — and save money.
Except that cities are where virtually all job growth is happening: 72% of all post-recession job growth has happened in cities with people, and many areas with a population below 5,000 are currently experiencing unemployment at higher levels than pre-recession.
Guess who’s helped by almost all jobs being concentrated in a few areas? . That’s not a surprise. Big businesses and the wealthiest Americans have been the recipients of almost all the post-recession gains.
Okay, then go to college and try to get yourself a better job. Except that’s just as expensive. Even after being adjusted for inflation, going to college in 2016 was. Remember, after being adjusted for inflation, wages are flat.
And if you try to forgo college to save money, know that . A college degree no longer helps you stand out from the pack, it merely lets you join the pack.
So to sum up, people are making the same amount of money but paying anywhere from 1.5x to 3x as much for housing and twice as much for college, which is now required for the large majority of jobs.
And most people can’t pay for college as they go and have student loans to pay off — in 2017 the average student graduated with . So people today are starting an average of 30K behind, being forced to spend up to three times as much just to live somewhere, and being paid the same amount as forty years ago
The Stock Market
Not so fast. What about stock holders? Haven’t they benefited? Everyone benefits when the stock market is up and it’s hit all-time highs since the recession.
Except very few people benefit from a higher stock market.
As of 2017, all groups but those making over $100,000 a year and those over 65 years old had lower rates of stock ownership than they did before the .
Only about half of U.S. households . And that includes 401(k) and other retirement plans. People in their 30’s aren’t being helped by money they can’t touch for three decades, even if they do technically own stocks.
And even when they do exist in any form, the investments of the lower and middle classes are minimal. As of 2018, 84% of all stocks were owned by the wealthiest 10% of families.
In fact, for 90% of families, a market fluctuation of 10% would have at most a “1 or 2% effect on their wealth holdings.”
The Bottom Line on the Jobs Report
When you see the jobs report headlines, they’re not telling the whole story. Even when you read the report itself, you need to go further.
Yes, March saw a net job add of 196,000, but it also saw 401,000 jobs being added that couldn’t fully support the people who worked them. Unemployment stayed at 3.8% but the number of people employed went down. Wages grew, but barely, and those numbers are inflated by the wages at the top. Overall, wages have been stagnant for more than 40 years. And stagnation has not been enough — housing and other costs have far outpaced inflation.
Tell me again how the economy is doing great? How are people supposed to survive and thrive when costs go up so much but wages don’t?
Either wages need to go up or costs need to go down. It’s a society wide problem — you can’t pull yourself up by your bootstraps when you can’t afford boots or straps. Nor should a phrase that means to do the impossible serve as a solution to a problem affecting tens of millions of people.
This has to be fixed on a society-wide scale. Or the rich will continue to get richer, the poor will continue to struggle, and the middle class will disappear entirely as the gap between the wealthiest and the rest of society widens. And the onus can’t be on businesses to reign themselves in. With the most recent tax cut they’ve proven once again that they’re only interested in , not bettering the lives of their workers.
Regina Borsellino is a Web Editor for InvestorPlace.com.
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