Opinion and Economic Analysis

Hicks: Root cause of suffering labor market elusive

May 11, 2013

It is wise to approach the cascade of economic data with some suspicion. Federal economic data sets are almost always revised a bit as more people are surveyed and late administrative filings are compiled.

The data sets often don’t mean exactly what we think they mean. For example, the employment data we read about treats all jobs the same, whether they are 15 hours per week or 45. Also, inflation is imperfectly measured, so the real values of anything denominated in currency will be a tad bit wrong.

That said, the United States has the most sophisticated, apolitical and effective economic data services in the world.

More troublesome than the errors are the tangible difficulties in discerning a trend.

At the beginning of the Great Recession, in December 2007, there were more than 26 full-time workers for each part-time employee looking for full-time work. By the end of the recession, in June 2009, that number had shrunk to less than 15 full-time workers for each part-timer.

There it has remained. More concerning is that all of the net job growth this year has been in part-time employment.

Even more troubling is the composition of these jobs. Since the end of the recession, job growth among those with a four-year degree has topped 4.4 million workers, effectively restoring the college educated to full employment. These folks make up about a quarter of the adult population.

Job growth among those with some college, but not a four-year degree, has been 1.1 million jobs. These people are a little larger share of the population than those with four-year degrees.

The remaining work force, which is just under half of adults, has seen cumulative job losses of 1.7 million workers since the end of the recession.

So, all the net job growth since the end of the recession has gone to those with college degrees. This disaster is becoming as bad as anything that happened to us in the Great Recession.

The humility here lies in not knowing for sure why labor markets are so dreadfully bad. Part of the story is the skills mismatch between workers and jobs.

While a large share of blame goes to business uncertainty about the future, the root cause is not yet clear. There are suspects: The uncertain costs of the Affordable Care Act may especially weigh on full-time employment. This would also explain fewer jobs for less-skilled workers. For them, health benefits are a relatively larger share of labor costs.

If this is the cause, there is no end in sight to our languishing economy.•

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Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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