Guest post by Peter Morici.
Jobs Growth Tanks in March
The Labor Department announced the economy only created 88,000 jobs in March as many more adults quit looking for work than found jobs-for many Americans, good job remain tough to find.
The headline unemployment rate is 7.6 percent, but adding in adults who are discouraged and quit looking for work and part-timers, preferring full-time positions, the jobless rate becomes 13.8 percent. And, for many years, inflation-adjusted wages have been falling and income inequality rising.
Sluggish growth is one culprit-the Bush expansion delivered only 2.1 percent annual GDP growth-that’s about the same as the Obama recovery after 42 months. However, globalization and technological progress have wrought fundamental changes that rapid growth alone can’t fix.
Cheaper natural gas and rising wages in China make the United States more attractive for manufacturing. However, new factories require very few workers-engineers have applied the wizardry of handheld devices to factory automation with amazing results.
Similar progress has reduced many business support positions ranging from secretaries to travel agents. All, slicing demand for workers with a general high-school education.
Over the last decade, the same thing has happened to college graduates occupying middle management and similar professional positions. Consequently, college graduates have been taking jobs once predominantly filled by high school graduates-insurance agents and adjusters, retail managers, to name a few-and the earnings advantage of college graduates over less educated workers has narrowed.
Well paying jobs abound for college graduates in technical areas-accounting, engineering, nursing and the like-but not for those with degrees in liberal arts and general business. Similarly, high school graduates with some additional training, often through a community college, can find good jobs, for example, in the energy, medical, and hospitality sectors.
All this gives rise to widening income inequality between those who have specialized skills and those who don’t, and it imposes particular burdens on the two bookends of the labor force-recent grads and workers above 50.
Recent liberal arts graduates face particular difficulty getting that first decent job-such as in finance or the media-where employer training and entry-level experience combine to impart job-specific skills that permit them to climb the ladder.
Displaced older workers face much longer periods of unemployment, and many never secure positions that pay as well as the jobs lost. Many are digging into retirement savings well before they are 65, creating an army of near-indigent elderly a decade or two from now.
To combat unemployment, the Federal Reserve has kept mortgage interest rates low, but this penalizes the elderly who rely on CDs and fixed-income investments. They are returning to work, often taking jobs and displacing younger workers.
Stronger growth would help and is possible. Forty-two months into the Reagan recovery, GDP was advancing at a 5.2 percent annual pace-that would bring unemployment down to five percent pretty quickly.
More rapid growth requires importing less and exporting more-dealing with the $500 billion trade deficit on oil, by drilling more offshore and in Alaska, and with China, by addressing its undervalued currency and protectionism.
Faster growth also requires right sizing business regulations to make investing in new jobs less expensive and time consuming. Regulatory enforcement is needed to protect the environment, consumers and financial stability but must be delivered cost effectively and quickly to add genuine value.
However, unless America wants to sell what it makes cheaply, like so many Asian economies, it must have a smarter, savvier, and better trained workforce.
Parents don’t want their offspring on the vocational track. Hence, high schools have become, overwhelmingly, college preparatory institutions, when it is possible to prepare many graduates to directly enter the labor force in technical areas.
College students don’t want the hard slog through nursing or engineering. Art history and economics are easier and less intruding on the social aspect of college. And universities are too much run by professors who prefer to contemplate the shortcomings of their civilization than train young people to build it.
In a nutshell, more and better jobs require pro-growth trade, energy and regulatory policies, and more realistic expectations among parents, students and the high schools and universities that train workers.
Peter Morici is an economist and professor at the Smith School of Business,, University of Maryland, and widely published columnist.