At the 2018 WCRI Annual Issues & Research Conference, Dr. Erica Groshen, former Commissioner of the US Bureau of Labor Statistics discussed labor market conditions.
The United States has added 9.8 million jobs since the prior peak in January 2008. While there have been some monthly fluctuations, the overall trend has been steadily upward. Over the past year, most of the growth has been in professional and business services, education and health services, and leisure and hospitality. There has also been strong growth in the construction industry.
The unemployment rate is down to 4.1%. This is the lowest rate since 2000. The unemployment rate is calculated by dividing the number unemployed by the number employed plus the number unemployed. This is the gold standard indicator of the job growth but it is just the tip of the iceberg for evaluating labor market conditions. For example, the long-term unemployed (longer than 26 weeks) do not show up in this rate. Neither do those who have stopped looking for work and those who are working part time because of the economy. Other important measures of the job market include compensation growth, participation, hours worked, and job openings.
While the unemployment rate is back below where it was during the recession, the number of people working part time because of the economy, and the number of long-term unemployed are still at pre-recession levels. Wage growth has been relatively moderate to flat for a number of years and this rate is still below pre-recession levels.
One troubling trend is that since 1973 there has been an increasingly widening gap between productivity and hourly compensation. In other words, as productivity goes up wages are not. This is leading to a significant difference in compensation between lower wage employees and the higher wage earners.
What does the future hold? Over time there have been cycles of growth and recession. It is likely this long-term trend will continue into the future. It is really not possible to recession proof the economy entirely.
Another emerging element of the labor market is the so called “gig” economy. This consists of multiple things. First, alternative work arrangements where a person has multiple or no fixed employers. Independent contractors are an example of this. Another element of the “gig” economy are contingent workers, those who have a temporary job. This area of the labor market is growing for many reasons including the internet allowing easily matchup of workers and those needing labor, fast pace of change requiring more employer flexibility, new generations may prefer gig work, and growth of industries where gig work is common.
One big concern about the “gig” economy is that it transfers risks from employers to workers. There is weaker protection for workers in terms of health & safety and wage & hour rules. There is also less stability for workers, communities, and the financial system. This includes less unemployment insurance, less paying into social security, and fewer people with employer provided benefits. The gig workers also tend to be less safe because of a lack of training and a focus on safety. There has been a growth in workplace fatalities for independent contractors.
Approximately 11% of the workforce is engaged in alternative work such as independent contractors. About 7% of the workforce are contingent workers, which are temporary arrangements. This includes students who are working a temporary job while going to school. Key measures relating to gig jobs over the last 20 years are relatively flat. In other words, in spite of perceptions there really is not a significant growth of jobs in this area. For example, ride share companies really have not added new full-time jobs as much as they have shifted jobs from traditional transportation services. Also, many people are not doing these jobs full-time but instead are using them to supplement their other employment.
There is a new survey on alternative work arrangement being published by the Bureau of Labor Statistics coming out in the next month. This is the first such survey since 2005. This is clearly an area that needs more study.