Jobless rate dips but jobs in the middle not growing

by Ned Barnett, News and Observer, December 14, 2013.

North Carolina’s unemployment rate dropped in recent months, falling from 8.3 percent in September to 8 percent in October. Over the year, the rate has fallen by 1.4 percentage points to its lowest level since November 2008.

That should be good news, but mostly it is a mirage. The main reason for the reduction isn’t that people are finding jobs; it’s that more people have stopped looking for them.

The number of employed North Carolinians rose by 6,225 in October, but nearly twice as many left the labor force. Some of the workforce shrinkage reflects an aging population and people going back to school, but much of it reflects discouragement.

As the jobless give up the search for work, they are no longer counted in the workforce. Taking them out can lower the unemployment rate, but it doesn’t lessen the problem of too many people without jobs.

North Carolina like much of the nation is utilizing less and less of its potential labor force. This is reflected in its labor force participation rate. In October, only 61.4 percent of people ages 16 and older were employed or were unemployed and looking for work. That's the lowest monthly rate since the federal government began keeping the state-level rate in 1976.

John Quinterno of South by North Strategies, an economic and social policy consulting firm in Chapel Hill, said broader measures beyond the unemployment rate are needed to see what’s really happening in the labor market. One indicator to watch, he said, is the labor force participation rate.

“The numbers are horrible,” he said. “The rate plummeted in 2008-09, and it recently has been trending down again. It has fallen every month of the year in 2013. It’s now at a 37-year low. ”

This is reflective of a deep change. More than four years after the recession officially ended in June 2009, high unemployment, underemployment and low and stagnant wages remain entrenched.

Michael Walden, an N.C. State University economist, has noted that what job growth is occurring is concentrated either in low-paying service jobs or high-paying jobs that require advanced technological skills. The solid jobs in the middle aren’t growing. Walden describes the shape of the job market as a “dumbbell.”

In that thin middle lies the crisis and the challenge for state and national leaders. An extraordinary shedding of jobs occurred in the recession, and a less-than-ordinary recovery has followed. Many would-be or once-middle-class people now face precarious futures. College graduates are struggling to find full-time work at a decent wage. Older white collar workers can’t get back to the types of jobs they lost and some can’t find any work at all.

James H. Johnson, a demographer at UNC-Chapel Hill and director of the Kenan Institute’s Urban Investment Strategies Center, said the exodus from the labor force reflects the duration of the economic hard times.

“A lot of people have given up,” he said. “Those declining numbers reflect the sharp increase in the long-term unemployed.”

It’s remarkable how resilient Americans have been in the face of a prolonged shortage of work. Young people have coped by staying longer at home – a trend that is weakening the home-building industry. Older people are moving in with their children or their elderly parents. Others are surviving off a spouse’s income or knitting together three and four part-time jobs.

In the face of this struggle, the government has done little to help. Republicans at the national level have cut spending. At the state level, they’ve cut taxes. Cutting spending through the sequester exacerbates the jobs problem. Tax cuts are merely pushing rope. Tax cuts don’t matter to companies already flush with cash, and they matter less to those without jobs.

On top of that, Congress is poised to cut food stamps and end extended federal unemployment benefits. North Carolina has cut unemployment payments and reduced the eligibility period. Such cuts are pushing the jobless crisis into the streets and it will get worse as the federal reductions tighten.

Ernie Mills, founder of the Durham Rescue Mission, said he has had to lay pallets on the floor for the rising number of people seeking a place to sleep.

“There are so many people that are unemployed, and if they get a job, it’s only a part-time job and it’s minimum wage, ” he told The News & Observer. “It’s very difficult for a person to make ends meet under that type of stituation. That’s one of the reasons we’ve got a such a big increase.”

What will it take for this struggle to get the attention of the people with power to do something? People need jobs. The government should focus on putting them to work. Some version of a Works Progress Administration joined with sweeping policy changes would give the hard-pressed not only income, but dignity. And it might just lift the economy out of its rut.