Jobs Report Makes Headlines, Masks Low-Paying Reality

Despite Upbeat Headline, Jobs Report Masks Low-Paying Reality

From the looks of the latest monthly snapshot of the American labor market released by the government on Friday, a long-bleak jobs picture is finally recovering. November saw 146,000 net jobs added to the economy, marking the fourth straight month of decent employment vigor.

But the recent consistent growth is masking a deeper truth: many of the jobs being created aren't the kind of high-paying ones needed to bolster an economic recovery.

More than half of the jobs created last month were in lower-wage industries, such as retail and hospitality. Hourly earnings in those service sectors are far lower than in areas such as construction and manufacturing, which saw no job growth last month and were two of the hardest-hit by the recession.

"You have these data blips coming in, and everyone wants to make something of them, but the jobs that are being created just aren't great jobs," said Kent Smetters, a professor of business economics and public policy at the Wharton School of the University of Pennsylvania.

Overall, retail saw the highest gains in new employment last month, some of which may have been boosted due to an earlier-than-usual Thanksgiving holiday. The hospitality field also saw a significant uptick, adding 23,000 jobs.

Both sectors are on the lowest end of median wages as measured by the Labor Department, with earnings hovering at about $13.38 per hour for hospitality and about $16.40 per hour for retail.

By contrast, jobs in construction and manufacturing pay between $24-$26 per hour. But it's those sectors that have consistently lost the most jobs since 2008, and have failed to rebound.

"Manufacturing and housing are the most cyclical sectors of the economy," said David Backus, chair of the economics department at NYU's Stern School of Business. "What you see in a typical recession is that they're going to go down a lot and then they're going to go back up a lot. The latter hasn't happened yet."

Aside from the lower-paying retail and hospitality sectors, job growth in the healthcare field was a bright spot for this jobs report. Average earnings in the healthcare field are much higher than in retail, according to government figures, but there is a wide disparity in earnings across the field.

One of the fastest growing sectors in healthcare last month was in the area of nursing and residential care facilities, for example. Wages in that area, which include lower-paid home health aides and nursing assistants, tend to be much lower on average than in other parts of the sector.

Experts also point to an education problem: the unemployment rate for people with a bachelor's degree is at 3.8 percent, while 8.1 percent of those with only a high-school diploma remain unemployed. For many higher-paying jobs, skilled workers aren't available. And with so many people desperate and seeking work, companies have the ability to pay lower wages and hang on to as much cash as they can.

"There's just a surplus of labor that allows firms to bid down wages," said Joseph Brusuelas, a senior economist at Bloomberg LP. "Because firms have to stay in business, when the demand is slow it's hard to pass along profits to labor."

Looking ahead, the consistent yet tepid job creation of the past four months will have to accelerate in order to make any appreciable difference in the unemployment rate. Although the unemployment rate dipped last month to 7.7 percent from 7.9 percent a month earlier, that was largely due to the fact that the number of people seeking work also declined.

"Nothing's really changed. It was a good report, but problems persist -- and significant ones," Brusuelas said. "We're adding jobs at about 150,000 a month, the majority of them are low-paying jobs, and the pace of job creation, while a positive, is not sufficient to bring the unemployment rate down for the right reasons."

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