LABOR MARKET RESURGENCE SCREAMS TO A HALT – Any Silver Linings Are a Mirage

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by Dave Allen, The International Forecaster:

Any illusions of a recovery in the labor market have been revealed to be sheer fantasy as the specter of rising payrolls come to a screeching halt.

And the few pieces of data that look promising on the surface for the most vulnerable working Americans are actually deeply troubling upon a deeper dive.

As 2020 came to a brutal end, an unequal K-shaped recovery was interrupted as the pandemic raged on while the government belatedly enacted an incomplete stimulus/relief package.

Average hourly pay that had been slowly but consistently rising since May rose by another 23 cents in December. That looks good in the aggregate; in reality, however, it’s a bad thing.

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The increase has been overtaken by a hefty number of lower-paid workers out of a job. When lower-paid people drop off payrolls, it inflates the overall wage figure for people who are still employed.

As an example, at the start of the pandemic — as the economy lost a record 22 million jobs — hourly pay soared by $1.34.

That’s a significant surge, considering the hourly figure typically fluctuates by mere cents up or down.

As shown in the chart above, over the course of the pandemic in 2020, job losses across all industries averaged 6%, according to government statistics – further exacerbating income inequality.

The losses were greatest in low-wage industries (11%), were more than double the jobs lost in medium-wage industries (5%) and over three-and-a-half times greater than losses in high-wage industries (3%).

As described by Courtney Brown of Axios, another “false hope narrative” exists in the gap between White and Black unemployment.

That chasm narrowed last month, as the government’s headline Black unemployment rate fell to 9.9% from 10.3%.

But Brown says that’s partly the result of how many Black workers left the labor force — i.e., gave up looking for work altogether.

On the other hand, more White workers re-entered the workforce last month. In fact, Whites were the only group to see a net rise in employment in December.

Latinos fared the worst by far, with 252,000 fewer considered employed in December. There were 40,000 fewer employed Asians, and 26,000 fewer Black workers.

Although the professional and business services sector (lawyers, accountants, consultants, etc.) saw the biggest job gains last month (161,000), over 40% of the gains were in temporary positions.

CYNICAL, ILLUSORY SILVER LINING

Economists say (cynically, I believe) if there’s a silver lining in last month’s numbers, it’s that the labor market pain was largely limited to the leisure and hospitality industry, which lost a whopping 500,000 jobs – many of them probably permanent.

This dynamic is contributing to our economy’s K-shaped rebound, with employees in many of the lowest paid industries out of work, while less virus-sensitive industries aren’t feeling the same pocketbook pain.

Bottom line: Thanks to this inequality, a large and growing number of people are struggling to meet basic needs.

According to the latest Census Bureau Household Pulse Survey, households with children, in particular, are having trouble affording enough food.

According to the survey collected in December, just prior to passage of the relief package:

29 million adults (14%), reported that their household sometimes or often didn’t get enough to eat in the last seven days — 7 million higher than in late August; it’s 18% of adults living with children.

That’s more than four times the share (4%) whose household didn’t get enough to eat at any point in 2019.

90 million adults (38%) reported it was somewhat or very difficult for their household to pay for normal expenses in the last 7 days — up by 13 million adults since August.

The rise in hardship as the new year starts is attributable, in part at least, to weaknesses of the relief packages enacted in the spring.

That includes certain programs in the CARES Act that didn’t last long enough — like increased jobless benefits that expired over the summer and initial stimulus payments whose impact faded to black later in the year.

Gaps in other measures, like inadequate nutrition and housing assistance and an expiring eviction/foreclosure moratorium, leave many families unable to afford the basics and others who could be out on the streets.

An estimated 14 million renters reported they weren’t caught up on rent in December. This figure has exceeded 11 million in every data release since late August.

HOLIDAY RELIEF AID NOT ENOUGH

Thankfully, December’s relief package will provide much-needed help to millions of families through measures such as increased unemployment benefits and food assistance, new emergency rental assistance, and another round of stimulus checks.

But like the CARES Act, these measures have a short duration and important gaps.

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