Five Reasons Why Prospects for Jobs, Wage Gains Are Dimming

Townhall ^ | 04/02/2015 | Prof. Peter Morici

[SeekAndFind]

Friday, the Labor Department is expected to report the economy added 247,000 jobs in March down from 295,000 in February and 324,000 during the fourth quarter.

Wages, for all but the most skilled professionals, continue to advance only slowly, and going forward good paying jobs and pay raises will likely be even scarcer for struggling middle and working class Americans.

The headline unemployment rate is down to 5.5 percent, from the recession high of 10, largely because fewer adults are participating in the labor force—for example, the 7 million men ages 25 to 55 that neither have a job nor want one.

Were the same percentage of adults working or seeking work today as when President Obama took office, the unemployment rate would be 9.7 percent.

Here are five reasons jobs and wage growth are likely to be disappointing the balance of 2015 and in 2016.

1. Stronger Dollar and Tepid Consumers

The dollar is up against the euro and yen, making U.S. goods and services more expensive than competing products from Germany and Japan. Along with the impact of falling oil prices on U.S. drilling activity that discourages business investment.

So far consumers have been hesitant to spend the windfall from lower gasoline prices—retail sales have plunged in recent months—and business activity simply will not support adding a lot of new workers.

2. Productivity Growth

In 2014, non-farm private sector output grew 2.9 percent but hours worked increased 3.0 percent—indicating labor productivity growth was near zero.

Advances in robotics, logistics and production design should permit productivity to advance at about 2 percent annually. If U.S. companies don’t find ways to use workers more efficiently, they will lose more ground to foreign competitors who do.

Consequently, forecasters such as at Wells Fargo, expect monthly employment gains to trend down to about 215,000 this summer and below 200,000 in 2016, leaving workers with less bargaining power in salary negotiations.

3. Myth of College Graduate Underemployment

Hundreds of thousands of college graduates continue to work in jobs that historically did not require a degree, but many BAs may be well placed as Starbucks baristas.

Tests administered by the Council for Aid to Education indicate 40 percent of recent graduates are not proficient in the basic problem-solving skills normally associated with a college education. Hence they may not be worth much more than $10 or $15 per hour paid to many high school graduates.

4. The Skills Gap

Many businesses complain about difficulties finding workers with the skills they need.

Although the United States has a world leading network of science and engineering colleges, too few Americans are enrolled. Two-year community colleges are not training enough young people for technical workers in high demand, and too many community college students instead are preparing to transfer into four-year college liberal arts programs.

5. Too Many Americans in the Wrong Places

Urban areas have recovered all the jobs lost during the financial crisis and added another 3 percent, whereas employment in rural areas is still down by an equal amount.

Rural workers often lack the skills demanded in better paying service industries centered in cities, like finance, technology and media, and simply can’t afford to relocate to high-cost urban centers for $10 to $15 an hour jobs in restaurants, dry cleaners and health clubs catering to elite service workers.

The balance of this year and next, the U.S. GDP growth will continue to inch along at a 2.5 to 3 percent pace. The economy will reward the top ten-percent of workers in engineering, finance and other elite services, but too many other Americans lack the skills to earn the $25 or $30 an hour needed to sustain a middle class life-style, and live in places where jobs of any kind remain scarce.

[2ndDivisionVet]

Boiled down to the one reason.

[Diogenesis]

“Western thinking has become conservative:
the world situation should stay as it is at any cost;
there should be no changes. ....
The communist regime in the East could stand and grow due to the enthusiastic support
from an enormous number of Western intellectuals who felt a kinship and refused to see
communism's crimes. And when they no longer could do so, they tried to justify them. In
our Eastern countries, communism has suffered a complete ideological defeat; it is zero
and less than zero. But Western intellectuals still look at it with interest and with
empathy, and this is precisely what makes it so immensely difficult for the West to
withstand the East.”
[Aleksandr Isayevich Solzhenitsyn at the Commencement, 8 June 1978, Harvard University]

[OttawaFreeper]

Socialism does not work, thump, socialism does not work, thump, socialism does not work, thump, socialism does not work, thump..

[InterceptPoint]

6. Obama
7. Obama
8. Obama

[kabar]

So why are we bringing in 1.1 million PERMANENT LEGAL IMMIGRANTS ANNUALLY, 20% of whom lack even a high school diploma? And we graduate more people with STEM degrees than there are jobs.

[RayChuang88]

I'll add this: our business regulations and tax laws are essentially strangling the US economy. We need to get rid of a LOT of unneeded business regulations and massively overhaul national taxation to get the type of broad-based economic recovery we saw in the 1980's.

[sheana]

Most of the immigrants now, both legal and illegal lack a high school education. It’s a lot more than 20%. I forget the percentage, I read it awhile back, but it’s really high.

[kabar]

Most of the immigrants now, both legal and illegal lack a high school education. It’s a lot more than 20%. I forget the percentage, I read it awhile back, but it’s really high.

Not so. Below are the figures from Heritage. CIS concurs.

[sheana]

Mmmm your chart says 51% of illegals and 20% of legals have no high school education. How is that not high?
The chart is only for head of households. I’ll bet if you add in the others in the families it’s even higher.

[kabar]

It is high, but not as high as you asserted. What is just as alarming is the educational levels for those who have graduated high school, or have some college or a college degree. They are also competing against Americans for jobs thereby creating a surplus of labor that depresses wages and takes jobs from Americans. In fact, they are getting all the new jobs. It used to be that we needed all these immigrants to do jobs Americans won't do, but now we also need them to do jobs Americans can't do. Both parties have abandoned the American worker.

[Cringing Negativism Network]

There is a simple reason for this.

Everything is now made in China, and imported to America.

America last year, spent 342 billion dollars more on stuff from China, than China spent on things made in America.

It was a blow-out.

Yet that trade deficit continues to worsen, and neither party is doing one thing to reconcile that (big) and growing problem for America.

Bring back American manufacturing.