U.S. Job Growth Surges in November

From our offices in Seattle we are a stones throw away from dozens of breweries, each churning out gallons and gallons of intensely hoppy beer. Thankfully, getting one of our local brews after work keeps getting easier. The U.S. economy added a total of 321,000 jobs last month (though the unemployment rate did not budge), including 27,000 additional jobs in bars and restaurants. The fresh supply of newly employed bartenders is illustrative of what people are calling the “low-wage recovery.” By one labor advocacy group’s calculations, low-paying jobs made up 41% of total job growth from July 2013 to July 2014. They go on to say, “There are approximately 1.2 million fewer jobs in mid- and higher-wage industries than there were prior to the recession, while there are 2.3 million more jobs in lower-wage industries.” This is a bit of a problem because lower paying jobs are not as conducive to activities that support GDP growth such as buying homes and supporting families. Some call the trend of low-wage job creation the “hollowing out” of the middle class (see the chart below) because we do see wage gains in higher-paying jobs. That being said, did you notice the large green orb labeled “Leisure and Hospitality” in the bottom right corner of the chart below? Those are our bartenders, with real wage growth greater than any other job sector around at plus 2%. Whatever pain middle wage earners are feeling, last month’s job creation report provides signs of respite…
 
Manufacturers added 28,000 jobs last month, beating the bartenders by a small margin, which is a relief because these jobs typically pay more. Other good news includes the creation of 20,000 construction jobs and 7,000 government jobs. According to Time Magazine’s Money segment, at least one economist forecasts job creation in the construction sector will continue in 2015 because rental vacancy rates are low and new homes need to be built to satisfy demand. If real GDP continues to grow, then we can also expect tax revenue to increase for federal, state and local governments, and this probably means more hiring in the government sector, too. But real GDP growth relies in part on wage increases, creating a catch-22-meets-chicken-egg type scenario. Low/no/negative wage “growth” turns out to be tricky to reverse. Indeed, the same labor advocacy group mentioned above estimates that from 2009 to 2013 real wage growth was negative across the board. The bottom 40% (those making less than $15 per hour) saw the largest declines in real wages: more than 4%.  Wages could be a problem if we expect real GDP growth to continue chugging along (beer pun intended), but the latest jobs report suggests they may be on their way up for the first time in years.