The Evolving US Employment Landscape

Jack Ablin Market Commentary

The December jobs report capped off a decade of labor market growth, and it’s been a remarkable 10 years. At 3.5 per cent, December unemployment dipped to its lowest level in 50 years, underscoring the strength of America’s jobs picture. The unemployment rate has been consistently situated below 4 per cent for nearly two years. Over the last decade, America’s workforce expanded by 17.4 per cent, or 1.6 per cent annualized, accounting for most of America’s 2.3 per cent annualized real economic growth during that period.

Not so obvious are some of the issues underneath the surface. America is closing in on full employment.  2019 was the third-lowest year of job creation in the last decade. We expect higher wage growth will be required to sustain an expanding job market. Average hourly earnings grew 2.9 per cent in 2019; the last time the unemployment rate was this low, in 1969, wages grew 6 per cent.

Warehousing & Storage jobs grew more than 21 per cent over the last five years, as employers responded to the demands of point-and-click, online purchases. Internet publishing & Podcasting expanded employee rolls by 13 per cent. On the flip side, its has not good to be in the apparel business or to be a coal miner over the last five years: such jobs have been disappearing.

Unemployment for high-school dropouts plunged to a record low 5.2 per cent. This number has been as high as 12 per cent as recently as 2013. Despite the improvement in unemployment among unskilled workers, America shed about 500,000 jobs that high school dropouts would have taken over the last five years. Clearly, a knowledge economy requires skills and employers have added more than eight million college-educated-level jobs since 2014.

For the second time in history the number of jobs held by women surpassed those held by men, as of December 2019. This also occurred for a brief period in 2009-2010 when employers slashed manufacturing and construction jobs in the downturn, which mostly affected men. Now, it appears that women are benefitting from America’s shift toward service jobs. As of last month, only 14 per cent of America’s workforce is in the goods-producing sector.

Job growth over the last five years has varied by state as well. Fast-growing states, like Idaho, Florida and Arizona, have added jobs by 15.5 per cent, 14.4 per cent and 14 per cent respectively, while commodity and mining states, like Alaska, Wyoming and North Dakota, are among the biggest job losers.

We expect America’s job market to continue to expand, with service jobs taking the lead. This suggests that wage growth will ramp higher as employers vie for a limited talent pool. At the same time, productivity gains will be difficult to achieve for two reasons. First, it’s more difficult to eke out productivity gains from service jobs. Think about how many more haircuts per hour a hair stylist could perform from one year to the next without also creating disgruntled clients. Second, at this stage of the labor market cycle, the most productive/talented employees are already spoken for; most incremental workers will likely be less productive. Think about selecting a kickball team at recess: the star players get enlisted early, leaving would-be couch potatoes toward the end of the draft.