EDITORIAL: Lots of jobs, but lousy ones
We keep hearing that the economy is so amazing, so wonderful.
“Pennsylvania, you had the single best year that you’ve ever had in the history of our country,” President Donald Trump said to an adoring crowd in Hershey Tuesday night, referencing the state’s unemployment rate, which this year dropped to as low as 3.8%.
And it's true, by some standards this is a great economy. Overall unemployment hit 3.5% in November, the lowest number in 50 years. The Fed is staying the course on interest rates. The Dow hit a new high on Thursday after Trump tweeted that the U.S. is "very close" to a trade deal with China.
But at the same time, we see more and more people struggling. Consumer confidence fell in November for the fourth month. Initial applications for unemployment benefits shot up by 49,000 last week to 252,000, the highest weekly total in two years, according to The Associated Press. A study from The Brookings Institute shows that 53 million Americans between the ages of 18 and 64 — 44% of all workers — qualify as “low-wage,” with median hourly wages of $10.22 and median annual earnings of about $18,000.
We've seen this disconnect for a long time as income inequality grows and wages stagnate but stock prices and the gross domestic product continue to bloom.
A new economic indicator will give a measurement to this feeling that something isn't right.
The job quality index, a joint effort of Cornell Law School, Coalition for a Prosperous America, University of Missouri Kansas City and Global Institute for Sustainable Prosperity, assesses job quality in the United States by measuring the ratio of high-quality jobs paying higher than the average wage to low-quality jobs with lower wages and fewer hours each week.
The JQI debuted last week, the same day the very low unemployment numbers came out. And it showed a very different picture than the 3.5% unemployment did.
The first JQI report gave a measure just under 81, which means there are 81 high-quality jobs for every 100 low-quality jobs. The researchers ran the index for the past 30 years, and this initial number is a slight improvement from early 2012, the lowest point, but is far off the high point of 90 good jobs for 100 bad ones in 2006.
In an introduction to the JQI, researchers posit that previous connections between unemployment and inflation, with low unemployment bringing on inflation as workers demand higher wages, have been severed, and that has changed the composition of the employment base itself.
“The channel through which this occurs is fairly simple: If a greater proportion of jobs produce incomes below the mean of all jobs (i.e. a reduction in the level of the JQI), than they did in the past, then an increase in the proportion of people working will have a lesser impact on household incomes — and therefore aggregate demand — than in the past," the JQI White Paper says.
This new measurement is what we've needed: a way to put numbers to the true disparity between the macro economy and the individuals and families struggling to survive.
With this new insight, we can hope governments and businesses can do something to bring more balance to the system.