19 May 2019

Jobs Return to Peak, but Quality Lags

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The U.S. finally clawed back all the jobs lost since the recession hit in late 2007, a watershed in a grindingly slow recovery that finds a labor market still in many ways weaker now than before the downturn.

U.S. payrolls in May hit an all-time high after the first four-month stretch of job creation above 200,000 since the boom days of the late 1990s, according to the Labor Department's latest employment report. In all, employers added 217,000 jobs last month, nudging payrolls above the prior peak in January 2008. The jobless rate, obtained from a separate survey of households, remained at 6.3%, the lowest level since September 2008.

Friday's report renewed optimism for a long-awaited acceleration in economic growth and helped drive stock markets to new highs. The Dow Jones Industrial Average rose 88.17 points, or 0.5%, to 16924.28.

Despite signs of sustained strength, the job market is a far cry from what it was before the financial crisis slammed the economy in 2008. The number of jobs in manufacturing, construction and government—typically well-paying fields—has shrunk, while lower-wage work grew. The U.S. has 1.6 million fewer manufacturing jobs than when the recession began, but 941,000 more jobs in the accommodation and food-service sector. More than 40% of the jobs added in just the past year have come in generally lower-paying fields such as food service, retail and temporary help.

The economy "is now beginning to show incremental employment growth," said Doug Handler, chief U.S. economist at IHS Global Insight. But now the focus is turning to the types of jobs being created. The first new job beyond the last peak, he said, will probably be "a barista at local coffee shop."

Heather Hodge of Seattle is one recently hired worker who feels "light years behind where I thought I'd be" when graduating from culinary school in 2010.

But the 24-year-old is glad to have health benefits and a decent wage—$15 an hour—to pay rent and cover student-loan payments. She was hired this spring as an ice-cream maker at Molly Moon's Homemade Ice Cream Shop in Seattle.

"At least now I have a steppingstone where my future looks tangible," she said.

The improving outlook is likely to give the Federal Reserve more confidence about winding down its bond-buying stimulus program this year. But the central bank may not shorten its time frame for raising interest rates, which have remained near zero since late 2008, given how difficult it is to assess the labor market's underlying vigor. Fed officials have their next policy meeting June 17 and 18.

"The Fed can begin to dial back their obsession with the top-line payroll number and instead focus on the quality of jobs created, who is working and growth in income," said Steve Blitz, chief economist at ITG Investment Research.

Steadier job growth in recent months should put more money into consumers' pockets and improve confidence, which could support stronger economic gains later in the year.

Click here for the full article in the Wall Street Journal.

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