Forget four years ago: We're worse off than in 2011
The jobs numbers show the economy is headed in the wrong direction.
By Stephen Gandel, senior editor
September 7, 2012: 1:10 PM ET
FORTUNE -- There's some of debate about whether or not we are better off than we were four years ago. But here's one thing that we can say for sure after this month's weak jobs report: Compared to a year ago, we are most certainly worse off.
Start with the headline number. In August, employers added 96,000 workers to their payrolls. That's actually better than a year ago, if only slightly. But that's only one month. What really matters is the trend, which is down.
Over the past six months, the economy has added an average of 97,000 jobs a month. At this time a year ago, the six-month average was 136,000, meaning the economy was growing 40% faster than it is today.
For the whole year, the economy has added an average of 139,000 jobs a month. That's better, but still worse than a year ago when that figure was 143,000.
What's more, those numbers come from the survey of employers. When the Labor Department asks individuals, the picture we get is a good deal worse. Go by that survey, which many say does a better job of capturing new businesses and the self-employed, and the economy's gains plummet to an average of just 6,000 jobs a month since March, or nearly one-sixth fewer than we were adding in the same time a year ago.
Secondly, the wage picture isn't improving either. The industry with the biggest hiring jump in August was restaurants, which are jobs, but not high paying ones. Employment in the manufacturing industry, on the other hand, dropped by 15,000. A year ago, the economy was still adding manufacturing jobs.
As a result, the average hourly wage for all workers fell in August by a penny to $23.52. That was up $0.40 from a year ago. But at just 1.7%, it's not much more than inflation. And it's less than the $0.49 increase we had a year ago. Of course, that's not a big drop in wage growth, but it's significant nonetheless. Higher wages means that employers are eager to add workers. That's clearly still not the case. And even if that's only slightly less so than a year ago, remember we're another year into the official recovery. Demand for workers should be significantly stronger at this point, not slightly worse.
Then there are temp workers. Most economists believe temporary hires are a good indication of where the job market is headed. It's a way for employers to dip their toe in the water, and many of the jobs lead to permanent positions. A year ago, companies were adding temp workers, nearly 21,000 in August alone. That's not the case any more. Last month, employers cut the number of temp workers they had working for them by nearly 5,000.
Overall, you could still make the case that we are better off than a year ago. The number of unemployed people in the country, at least just counting those looking for work, is down 1.3 million in the past year to 12.5 million. And the unemployment rate dropped a full percentage point to 8.1%.
But in the same time, the pace of people dropping out of the workforce is up too. That number rose by 2.7 million in the past year, or a half a million more than a year before that. Yes, some of those people voluntarily retired. But a good percentage of those people have just given up. That's probably the best gauge of optimism in the economy that there is. If you don't believe you can land a job, you basically don't believe in the economy. And as long as the number of people who lose faith in the economy is rising, it's hard to make the case that we're better off.
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