US Economy
US jobs market improves moderately; 36% of workers in new jobs took pay cut of 20% or more
By Michael Hennigan, Founder and Editor of Finfacts
Apr 4, 2011 - 1:09 AM

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Source: The Hamilton Project, Brookings Institution

The US jobs market improved moderately in March and on Friday we reported that 216,000 new jobs were added in the month. More than one-third (36%) of those who lost and found jobs had to take a pay cut of 20% or more.

The Wall Street Journal reports that the recovery seems to be going hand-in-hand with workers taking lower-paying jobs. More than half of those full-time workers who lost jobs between 2007 and 2009 and then found full-time work by early last year said their new jobs came with lower wages. Some 36% saw a pay cut of 20% or more.

Gary Burtless, Senior Fellow at the Brookings Institution wrote that the improvement in the job market has done little to reduce the ranks of the long-term unemployed. The March household survey shows that the number of Americans who have been unemployed for 6 months or longer increased almost 130,000 in March. The number of long-term unemployed was essentially the same in March 2011 as in December 2009, when the labour market recovery began. The number of long-term unemployed was almost 4.8m higher than the number in December 2007, the last month of the 2002-2007 economic expansion.

He said the latest jobs report contains another hint of labour market weakness: Workers’ real earnings are now beginning to slip. Between October 2010 and February 2011, real hourly and weekly earnings in the private sector fell 1.1%.

Meanwhile, Michael Greenstone, director, The Hamilton Project and Senior Fellow, Economic Studies and Adam Looney, Senior Fellow, Economic Studies, and Policy Director, The Hamilton Project, at the Brookings Institution, wrote that in addition to the threat of stagnating wages for both men and women, the United States continues to face a severe job gap of just under 12.2m jobs.

As in previous months’ postings, The Hamilton Project updates America’s “job gap,” the number of jobs that the US economy needs to create in order to return to pre-recession employment levels while absorbing the 125,000 people who enter the labour force each month.

The chart above shows how the job gap has evolved since the start of the Great Recession in December 2007, and how long it will take to close under different assumptions for job growth. The solid line, in particular, shows the net number of jobs lost since the Great Recession began. The broken lines track how long it will take to close the jobs gap under alternative assumptions about the rate of job creation going forward.

The economists say that if the economy adds about 208,000 jobs per month, which was the average monthly rate for the best year of job creation in the 2000s, then it will take until June 2023 - - another 12 years - -  to close the job gap. Given a more optimistic rate of 321,000 jobs per month, which was the average monthly rate for the best year of job creation in the 1990s, the economy will reach pre-recession employment levels by June 2016 - - not for another five years.

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