In my last blog post I discussed the difference between measuring the “Donut”-jobs-versus the “Hole”-unemployment. For those that did not read that post you can find it by clicking Here. For those of you who want the “Cliff Notes” version of this topic it can be summarized as follows:
My last blog focused on the Household Survey. Today’s blog focuses on the Establishment Survey. There has been a lot of media coverage and communication from Federal Reserve officials that jobs growth is healthy and the nation is nearing full employment. Let us look at what the data behind the Establishment Survey tell us about the jobs market.
Jobs Created Since the Recession
The nation had 138,413,000 jobs as of 12/31/2007. Even though the recovery officially started as of 6/30/2009, the nation continued to shed jobs until 12/31/2009. At that time the nation had 8,796,000 fewer jobs than 12/31/2007. It took the U.S. until 3/31/2014-over 4 years from the low-before the cumulative jobs growth became positive. From that point forward we have continued to add jobs to the point where we now have 144,598,000 jobs, as of 8/31/2016, which is a cumulative increase of 6,185,000 from where we started on 12/31/2007.
What Types of Jobs Were Created?
The Bureau of Labor Statistics divides jobs into 3 major categories: Goods Producing, Service Providing, and Government. The hidden story behind the headline numbers is that, in aggregate, all of the jobs creation since 12/31/2007 has occurred in the Service Providing part of our economy. Here is the jobs creation story when we look at those three sectors.
Here is the breakdown by specific industry sectors:
Education & Health Services: 3,831,000
Professional & Business Services: 2,233,000
Leisure & Hospitality: 2,026,000
Retail Trade: 397,200
Transportation & Warehousing: 365,900
Other Services: 182,000
Financial Services: 35,000
Mining & Logging: (61,000)
Wholesale Trade: (111,500)
Information (media & telecom) (242,000)
From this perspective, if you were looking for a job in the Service Providing sector, the jobs market certainly appears to be healthy. If you were looking for work in either the Goods Producing or Government sectors, then the answer is more like “not so much”.
Digging further into the data reveals the following information that is not actively covered by the media.
Once again, your perspective of whether the jobs market is healthy or whether we are near full employment may be heavily influenced by what gender you are.
Here is the last bit of perspective before I close out this blog post.
That means that someone who was previously working in the Goods Producing jobs sector, on average, earned a weekly wage of $1,085.68 (40.3 hours x $26.94). That equates to an annual income of $56,455.46 ($1,085.68 x 52). If they were unable to find another Goods Producing job and moved to the Service Providing sector their weekly wage, on average, would have fallen to $845.82 (33.3 hours x $25.40) and their annual wage would have fallen to $42,982.64 ($845.62 x 52). This means that their annual wage declined by $12,472.82.
The data that comes from the Establishment Survey highlights the importance of looking beyond the headlines. Clearly, someone’s perspective on the health of the jobs market is dependent on their experience since jobs creation has not been universal or balanced throughout the various industry sectors.
Perhaps this helps explain the anti-incumbent attitude and underlying mood of anger that seems to exist in the current election campaign.
The views or opinions in this article are those of the author and do not necessarily represent the views of Washington Trust Bank or senior management. Washington Trust Bank believes that the information used in this blog was obtained from reliable sources, but we do not guarantee its accuracy. Neither the information nor any opinions expressed constitutes a solicitation for business or a recommendation of the purchase or sale of securities or commodities.
Steve Scranton is the Chief Investment Officer and Economist for Washington Trust Bank and is a CFA charter holder with over 30 years of investment experience with equities, tax-exempt and taxable fixed income securities. Steve actively participates on committees within the bank to help design strategies and policies related to client and bank owned investments. Steve also serves as the economist for the Bank and has been a featured speaker for both client and professional organization events throughout the Northwest.