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February 15, 2015

Jobs Report and the Polarized Labor Market

The monthly Employment Situation Summary (aka the jobs report) offers good detail on the state of employment in the United States. Despite claims that the job market is unambiguously happy, there is real evidence of deepening problems along with the good news. A look at job creation from January 2014 to January 2015 paints a clear picture of the continuing challenge in our labor markets.

The good news is that over the course of a year, the economy has grown by a tad more than 3 million jobs. The unemployment rate has dropped from 7.0 percent to 5.7 percent, and the labor force participation rate has risen by 0.4 percent. Also, the share of long-term unemployed has dropped by 2 percentage points, as have the levels of discouraged workers. One could hardly blame the administration for boasting about these numbers. Still, the remainder of the report is a good bit less sanguine.

Of the 3.026 million jobs created over the past year, precisely 75.05 percent were in management, professional and related occupations. Almost 45 percent of new jobs nationally occurred in the professions: law, medicine, science, engineering and the like, while almost a third was in management and financial operations professions. These are jobs that require a four-year college degree or more.

In contrast, service occupations grew slowly, accounting for fewer than 2 percent of all net new jobs over the past year. Sales and office occupations, including administrative support, lost 118,000 positions over the year. Jobs in mining, construction, agriculture, and maintenance and repair accounted for only 86,000 new jobs, or 3.8 percent of total job growth over the past year. The only real bright spot for blue collar workers was in the manufacturing and transportation occupations, which saw growth of 731,000 or a quarter of total job growth over the past year. It is worth noting that more than half of these jobs probably require some college education.

It is very blunt news that in 2014 there were 25 percent more jobs created for the roughly one-third of folks with four-year degrees than in all the other educational attainment categories combined.

Other than temporarily quieting those folks who think college is unimportant, these facts offer no good news. This jobs report clearly depicts the hastening of what we economists call the polarization of labor markets. Forget the nonsense about the “1 percent" crowd, the real problem­facing American income distribution is that there is a shrinking middle set of job opportunities.

There are many reasons for this phenomenon. Some are purely market-based and inevitable. Technology will make redundant many jobs. Ill-conceived labor market policies raise the cost of hiring lower wage workers, cutting off job opportunities. We also suffer from long neglect of educational attainment in the U.S., which leaves many men and women unprepared for an economically productive life.

This problem is cause for national concern, and ought to spur discussions around every dinner table in this country. For regions plagued by low educational attainment, this is a looming disaster.

Link to this commentary: https://commentaries.cberdata.org/773/jobs-report-and-the-polarized-labor-market

Tags: jobs and employment, education


About the Author

Michael Hicks cberdirector@bsu.edu

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Hicks earned doctoral and master’s degrees in economics from the University of Tennessee and a bachelor’s degree in economics from Virginia Military Institute. He has authored two books and more than 60 scholarly works focusing on state and local public policy, including tax and expenditure policy and the impact of Wal-Mart on local economies.

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