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March Unemployment Report: Where’s the Dough?

Posted by Larry Doyle on March 6, 2011 9:30 PM |

The Unemployment report released this past Friday would seem to have some good news for everybody:
1. The unemployment rate ticked lower to 8.9% and economists project it to head even lower.
2. Non-farm payrolls increased by 192k jobs with the private sector adding over 220k jobs while state and local employment lost approximately 30k jobs.
3. Last month’s report was revised to show even greater job growth.

All good and we can start thinking of March Madness on the college hoop circuit, right? Well, not so quick. What is the fly in the ointment? Despite the perceived improved job situation, the overall number of unemployed has barely budged off the bottom of the barrel. How does that work? The fact that so many of our fellow brethren whom have given up looking for work altogether remain out of the labor pool completely and thus are not counted in the unemployment rate. If they reenter the labor pool, the overall rate of unemployment could very quickly move higher.

Additionally, despite the seeming improved tone to employment overall, the simple fact is we are not witnessing an accompanying increase in the average hours worked per week or in the wage component of the report. Wages paid especially are keeping the overall core rate of inflation in check while we all are paying more for food, gas, health care and assorted other items.

Clinton labor Secretary Robert Reich writes in compelling fashion on this topic of wages in a recent commentary entitled, The Real News on Jobs:

Are we making progress on the jobs front? The Bureau of Labor Statistics reports 192,000 new jobs in Februrary (220,000 new jobs in the private sector and a drop in government employment), and a drop in the overall unemployment rate from 9 to 8.9 percent.

We’re heading in the right direction but far too slowly to make a real dent in unemployment. To get the unemployment rate down to 6 percent by 2014 we’d need over 300,000 new jobs a month, every month, between now and then.

Overall, the number of unemployed Americans – 13.7 million – is about the same as it was last month. The number working part time who’d rather be working full time – 8.3 million – is also about the same.

But to get to the most important trend you have to dig under the job numbers and look at what kind of new jobs are being created. That’s where the big problem lies.

The National Employment Law Project did just that. Its new data brief shows that most of the new jobs created since February 2010 (about 1.26 million) pay significantly lower wages than the jobs lost (8.4 million) between January 2008 and February 2010.

While the biggest losses were higher-wage jobs paying an average of $19.05 to $31.40 an hour, the biggest gains have been lower-wage jobs paying an average of $9.03 to $12.91 an hour.

In other words, the big news isn’t jobs. It’s wages.

At this rate, the unemployment rate will continue to decline. But so will the pay and benefits of most Americans.

What is the impact of lower wages and lessened benefits? Consumers getting further squeezed and having less to spend on discretionary items.

Do readers see an effective reality of WORK MORE for LESS PAY within their own locales?

Comments always encouraged and appreciated.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own and not those of Greenwich Investment Management. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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