If the Jobs Recovery Is ‘Real,’ Why Are Economic Fears Lingering?
The recovery from the 2008 financial crisis and subsequent recession has lasted five full years, but even amid news that the U.S. economy grew a better-than-expected 4.2 percent in the second quarter and emerging unemployment remains well within comfortable bounds, the story of growth is much more complex than it appears at the surface. Thanks to wage stagnation and the concentration of employment gains in low-wage jobs, many Americans are still facing financial difficulties. A new survey conducted by Rutgers University found that two of every three Americans felt no improvement in their economic circumstances in the past year, while only approximately one in four expect their personal finances to strengthen in the coming year. And Gallup’s Economic Confidence Index tells the same story; while readings have been generally stable, suggesting November’s congressional midterm elections have pulled the nation’s focus to politics, it is important to remember that Americans are no more confident about the country’s near-term economic health than they were are a year ago. And views are still sharply negative.
The labor market is far from completely healed, even though it is now healthier than at any point in the past five years. The steady decline of emerging unemployment is the most obvious manifestation of that reality. Jobless claims — which serve as a proxy for layoffs — highlight the fact that emerging unemployment is returning to acceptable levels. Or, in other words, fewer Americans are being laid off, even if long-term unemployment remains elevated and the labor force participation rate stands near record lows — the dual concerns of Federal Reserve Chair Janet Yellen. The jobless claims report released Thursday by the Department of Labor’s Bureau of Labor Statistics showed that 1,000 fewer Americans filed initial applications for unemployment benefits in the seven-day period ended August 23, bringing total weekly claims down to 298,000. At that level — a nearly eight-year low — jobless claims are just below the important benchmark level of 300,000, which indicates stability in the labor market. By comparison, at this time last year, new applications stood at 336,000.
When jobless claims fall below 400,000 per week, economists consider the Labor Department’s report to be evidence of an improving labor market, and weekly claim numbers lower than 350,000 indicate moderate job creation. Of course, there is little value in placing too much significance on any one jobless claims report. But the underlying trends are strong as well; claims have fallen below 330,000 in 22 of the past 25 weeks and below 300,000 in four of the last six weeks.
The decrease in weekly jobless claims was accompanied by a decline in the four-week moving average. Jobless claims provide the first look at the employment situation for any given month, but since the weekly figures can be volatile, economists use the four-week moving average to understand wider trends in employment, which are far more telling of labor market health than weekly readings. Last week, that key measure dropped 1,250 to 299,750. Several weeks ago, that measure stood at the lowest level recorded since February 2006. But the number of workers continuing to draw unemployment benefits — a measure reported with a one-week lag — increased by 25,000 to 2.53 million in the week ended August 9, a new recovery low. Over the past twelve months, continuing claims have decreased by 454,000.
The Labor Department’s jobless claims numbers and job creation numbers prove the job recovery is real, as FiveThirtyEight’s Ben Casselman noted in early July — after the government’s official numbers showed employers added 298,000 jobs in June, the strongest gains of the year. “For much of the five years since the recession ended, the job market has been stuck somewhere between disappointing and terrible. Employment was rising, but wages were stagnant. Unemployment was falling, but mostly because people were giving up looking for work. Hiring would accelerate for a month or two, but would quickly lose that momentum,” he wrote. “But in recent months, something has changed.”
But while the recovery is real, it cannot be said that the American economy will be what it once was. The Rutgers University’s John J. Heldrich Center for Workforce Development report showed that a vast majority of Americans — 71 percent — believe the Great Recession permanently altered the economy, an increase from only 49 percent in November 2009. Yes, the U.S. economy grew at a rate of 4.2 percent in the second quarter, according to the Department of Commerce’s first revision, a welcomed recovery from the 2.1 percent contraction recorded inteh first quarter. But economic growth — which has never been consistently strong since the recession ended — has not registered with average Americans. Job creation is strong, and the economy has gained back all the jobs lost during the recession.
But a huge share of the nearly 10 million jobs created since early 2010 are low-wage. The United States Conference of Mayors — a nonpartisan group comprised of the head officials for the 1,400 cities across America with populations of more than 30,000 — found in a recent study that the average annual wage in industries that lost jobs during the recession was $61,637, but the average for new jobs gained through the second quarter of 2014 was a little more than $47,000. This means that although the country has regained the jobs that were lost during the recession, those jobs pay 23 percent less on average than they did prior to the recession. That accounts for more than $93 billion in lost wages, the lion’s share of which has been transferred to the top percent of United States income earners. And wages are stagnating. A new study from the Economic Policy Institute’s Raising America’s Pay initiative showed that during the first six months of 2014, inflation-adjusted hourly wages decreased for a majority of workers, even those with a bachelor’s or advanced degree. Plus, record-high stock index levels do not help the large numbers of American who do not own any stocks.
And only 22 percent of respondents to the Rutgers survey believe that the government can improve their economic fortunes.
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