Sat, 5 Apr 2014
You're not getting the full picture if all you consider is the number of jobs added, says Morningstar's Bob Johnson.
Note: While Bob Johnson is on vacation, we are featuring this video interview in place of his April 5 column. Bob's regular column will resume April 12.
Jason Stipp: I'm Jason Stipp for Morningstar.
We've seen the U.S. employment market largely recover in terms of the number of jobs added, but what about the quality of jobs?
Here to offer his take on this question is Morningstar's Bob Johnson, our director of economic analysis.
Thanks for joining me, Bob.
Bob Johnson: Great to be here today.
Stipp: In terms of number of jobs lost in the recession and number of jobs gained back in the recovery, where are we?
Johnson: In the private sector, we're pretty close to getting all of them back. And on the service side, we even got more than all of them back. We're going to be all the way back certainly within the next six months, any way you might want to cut it. It took a long time--about four and a half years altogether.
Stipp: As far as number of jobs, we're getting back to whole again since 2008, but the makeup of those jobs is different, and in some cases, that's not good news.
Talk about how some of those trends are different now and what kind of jobs we actually are adding.
Johnson: That's one of the really interesting things. We all get carried away looking at the top-line employment number, but really the growth has come in very different ways. We've had a relatively good run in services businesses, but we've added fewer manufacturing jobs, for example, as a percentage growth rate. It's better than it's been in other recoveries, but it's still being dwarfed by what's happening in retail.
Stipp: We're seeing a shift toward services, retail, leisure, and we're growing more slowly in some manufacturing jobs, and there's a big difference there as far as what they pay, and that's something that's important to keep in mind.
You have some data here. Let's start with a manufacturing job. For that segment--these are the major categories in the employment report--what are some of the average data as far as the pay there?
Johnson: When we look at the average pay in the manufacturing sector, it runs about $24.65 an hour, which is on the higher end. There are a few jobs that pay more than that, but they are by smaller categories. This is a big block of workers--the categories with over 10 million employees, and certainly it is one of the top dogs.
Stipp: What does the work week look like for those folks in manufacturing? How many hours?
Johnson: That's also very important, because you can't look at just the hourly pay. If they're only working a few hours, who cares?
But they are working among the longest work weeks, at something like 40.7 hours. There are people in mining who are getting really overworked right now on all those shale projects, and also at utilities. Those two categories are both higher, but then it's basically the manufacturing sector that's next in line.
Stipp: Manufacturing is looking good from a wage perspective, also a nice solid work week. Now let's talk about retail, where the numbers are quite dramatically different.
Johnson: Yes. First of all, starting with hours. Remember we said 40.7 hours per week for manufacturing. They only run about 30 in retail. So that's about 25% less hours for a retail job.
The pay differential is also large, from $24.65 in the manufacturing sector to only $16.81 in retail. So it's a huge difference.
Stipp: What about in the leisure sector, another area where we've seen a lot of jobs added.
Johnson: That even gets worse. That's primarily hotels, bars, and restaurants--those are the categories that are rolled up into [the leisure sector]. There, the hours worked are 25.7. Now remember, it was 40.7 for manufacturing. So, it's a huge difference. Then if you look at leisure wages, they're $13.76 an hour. So that's almost half of the $24.65 that an average manufacturing job would pay.
There is a huge gap there, and when you roll it together with the hours and the wage, one manufacturing job equals about two retail jobs and three leisure and entertainment jobs. So if we just look at the employment report and say, it looks great, but they are all retail jobs, and we actually lost manufacturing jobs, we actually could be losing ground in terms of consumer income.
Stipp: Let's talk about what some of those growth trends are, because unfortunately, we have been seeing quite a bit more growth in the retail and the leisure space than in the manufacturing space.
Just in 2013 alone, how did the differences in the growth rate stack up?
Johnson: They're pretty dramatic. We added only 61,000 manufacturing jobs, about 282,000--or four times as many--in the retail category. And probably six or seven times that number in the leisure and hospitality, about 400,000 jobs added. So clearly, the growth has been in some of those lower-paying categories.
There was one sector that did buck the trend, that had both excellent employment growth and also high total weekly wages, and that's the business and professional services category.
Unfortunately, one aspect of that category is that the growth mainly came from temporary help, and that means, workers can't necessarily count on those jobs long-term. So, while it did well and we're pleased with it, it's not one of the categories that makes me get excited about the employment market.
Stipp: So what are the takeaways as you're looking at the employment report? This could have a very big impact, obviously, on the money that's actually in consumers' wallets. What do you have to keep in mind as you're looking at it? These seem like secular changes here.
Johnson: We all get excited about the employment numbers--it's 50,000 or 150,000 jobs--and we know those are often revised and overly volatile to start with. But then on top of it, we're really looking at the wrong thing, if all we look at is the number of jobs, because the job count is the same if it's one hour in a hotel room at $15-$16 an hour, or if it's a manufacturing job at 44 hours a week, paying $25 an hour. They both get counted in that same report, the same way. That's why you've got to look at both the hours worked and the average wage.
Stipp: Important context for the employment report. Not really great news for us here in the U.S. given these trends. Thanks for joining us and for these insights today.
Johnson: Thank you.
Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.