The U. S. Department of Labor’s Employment Situation report for March showed that the improving economy was beginning to have a positive effect on jobs. A total of 162,000 workers were added to nonfarm payrolls, the largest monthly increase in years.
The rejoicing was tempered not only by the fact that nearly half those jobs were temporary — 48,000 census takers and another 40,000 temporary workers hired in the private sector — but also by how far we still have to go.
The unemployment rate remains at 9.7 percent, unchanged by the increased payrolls because the number of people seeking jobs increased. The number of people unemployed for more than a half-year has now reached 6.5 million. And the Department of Labor’s estimate of hidden unemployment, which includes both discouraged workers and those working part-time because they cannot find full-time work, has risen to 14.8 million people.
Still, there was a considerable amount of good news in the report. Employment in construction, for example, held steady for the month. And while that might not seem like much of an achievement, it is a big step forward when compared to last year, when the industry had averaged a loss of 72,000 jobs a month.
The economy is clearly coming back from a severe recession. In past recessions, jobs have lagged behind other parts of the economy and that is exactly what is happening now.
The fact that we understand the economics behind the inertia in jobs growth, though, doesn’t make the process any less painful. The rejoicing in Washington, D.C., and on Wall Street must seem like a cruel joke of some sort for the people still out of work or just being laid off, as 21,000 finance and insurance industry workers were in March.
Economists have been called paid worriers, and despite the encouraging news in this most recent report there is no shortage of things to worry about.
Because of its key role in the employment situation, our education system is certainly one of those things. The Labor Department data paints a clear picture of one specific way that education and employment are related. There is a strong correlation between education level and unemployment; the more education you have, the less likely you are to be unemployed.
The latest data, for example, shows that a college graduate is only about a third as likely to be unemployed as someone who did not graduate from high school, and only half as likely as someone with a high school diploma. If our education system does not solve the drop-out problem, the chronic unemployment odds will only get worse.
Another dimension of the education issue can be seen in another set of Labor Department numbers that describe the type of work people do. In March, of the people who were working, fewer than 1 person in 5 had a job in agriculture or in the various industries producing goods. The rest of us all worked in something called services.
As our country’s economy developed, productivity gains in agriculture and goods production fueled not only our rapid economic growth but also the expansion of services, both public and private.
This was made possible because productivity improvements in growing food and in goods production were primarily the result of investments in labor-saving technology. That same productivity freed up people to work in the service sector and provided the prosperity so that service industries could afford to hire them.
The flow of gains from investment and productivity is harder to trace these days. First, when the production of real goods is outsourced offshore, it is not at all clear who reaps the benefits of subsequent productivity gains.
Second, investments in the service sector do not typically fit the labor-saving pattern. Productivity gains are harder to measure and more likely to back innovations in organization, marketing or product-service packaging. Instead of labor-saving, these often are often more demanding of labor in terms of adaptability, critical thinking, decision-making and perception — precisely the kinds of things that improve with education.
Education is expensive, however, and we can only afford it — and other things — largely because of productivity improvements made in the production of food and real goods. If those productivity increases slow down, or their impact is lessened by the shrinking of industries because of outsourcing, that could put an upper limit on the size of the service sector that can be supported, especially in education and medical care where costs continue to rise so rapidly.
The combination of these economic forces could mean higher levels of chronic unemployment, and that’s the problem. Some economists are already worried about these things, but there is no entry fee. We can all join in.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.
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