According to the government the economy added 255,000 jobs in July, a blowout figure. What’s more, the number of people not in the labor pool decreased by 184,000, which means the labor participation rate went up. But it’s unfortunately typical that the raw jobs numbers don’t tell the whole story. That’s the main reason Americans remain pessimistic about the economy and their employment future. Telling people the overall numbers doesn’t change the balance they see in their checking accounts; the gauge most Americans use to assess both the current employment market and their future.
This discrepancy between reality and expectations is both clear and quantifiable. A little over half of Americans say they could be happy making less than $100,000 a year, and studies have shown that financial happiness plateaus around $75,000 a year. But according to government figures, the average salary in America is around $46,000 a year. That gap between where we would be happy and where we are is the root of our common discontent.
Alluvial Fund August 2020 Performance Update
A Lack of High-paying Jobs
The problem the statistics don’t reveal is that it doesn’t matter as much how many jobs the economy creates if they’re low-paying jobs with few benefits. When your economy is dependent on consumer spending, then the goal becomes creating the kinds of jobs that give Americans more spending money, and that’s not happening. In the U.S., more than anywhere else in the world, the lack of growth can be tied back to a lack of consumer spending.
Enthusiasm Without Facts
When we see a huge number like “255,000 jobs” our, and the media’s, first response is gleeful. But that initial enthusiasm also tends to reinforce trends like rising home prices. Again we see how unexamined job “growth” puts us in a bind. Just because the numbers are bigger it doesn’t mean people are able to afford higher prices for homes and apartments. This disconnect explains why on paper our economy gets better, but nothing actually seems to improve for the average American.
Ignoring the “Gig Economy”
There are also a lot of Americans working in the expanding gig economy, cobbling a work life together out of many small income streams with no defined benefit plan. When the government tries to count these workers they’re forced to guess, because Congress cut off funds to study contractors and independent labor in 2005. It’s possible, if Congress once again allots funds to survey independent contractors, that we could discover the labor participation rate is actually higher than we’ve been led to believe. People haven’t checked out of the work force; they’re struggling to survive, uncounted, on its fringes.
The No-benefits Income Hit
The lack of good jobs also underscores another problem, and that’s the number of people working jobs with few or no defined benefits. Working jobs with no benefits means that the costs of healthcare coverage and other expenses fall solely on the worker. So taking a job without benefits, which isn’t optional for many desperate Americans, is also taking a substantial pay cut.
Perhaps it’s time we started changing the metrics we use to measure the labor market. An expanding base of low-paying jobs doesn’t really help the economy and serves to further divide the nation along economic lines. Equating my long-term white collar job, with full benefits, to your gig driving for Uber, with no benefits, as you struggle to make rent and routinely fall short on health insurance premiums, is neither a fair comparison nor real economic progress. Banner job creation headlines, composed mostly of low-paying, unstable service sector jobs, are nevertheless encouraging price increases in housing, and giving lawmakers cover to avoid working on the big problems. The job creation numbers are important; but even more crucial is the quality of those jobs.