American Labor Market Overview and Trends
Labor market is one of the most important parts of any national economy, and USA is not an exception. The US Labor market has few significant trends that show how it was developed in the past and how it will be looks like in future. Unemployment rate analysis, job growth rate, and income analysis – these are the major sectors of Labor market that could represent its general overview.
First of all, the unemployment rate should be analyzed. If we look on past two decades as for analyzed period, we will definitely see two major period of US Labor market that are divided by financial crisis of 2008-2010. The first period (before the crisis) could be described as very stable and highly-efficient. The average annual unemployment rate was nearly 3% (the lowest rate was at the end of 2000 with 2,6%, the highest – 3,5% in 2003). But with the start of crisis the situation on Labor market has changed rapidly – the unemployment rate in 2009 was nearly 8%, in the hardest 2010 – almost 10%. After 2012 the unemployment rate started to decrease and at the end of 2015 it was on the same level as before the crisis – 3,15%.
It might be thought that the market has recovered, but the reality is different. The situation on Labor market could not be analyzed only by unemployment rate – the important dimension of the market could be reached by looking on participation rate. In 2000 64,31% of all civilians were employed (and 33,05% were out of labor force). At the beginning of 2016, with the same level of unemployment rate, only 59,33% are employed and 37,52% of civilians are out of labor force. This negative trend is very dangerous in perspective of further Labor market development. The one of the latest report of Bureau of Labor Statistics shows that only 80,8% of civilians in ages between 25 to 54 are involved in labor force, so the reason of such a low participation rate is not a high level of retirement.
Moreover, a long-term unemployment is an important factor of market development as well. The major indicators of such unemployment are number of workers that were without work for more than half of year and number of weeks without the work. As for number of workers that are long-term unemployed, at the end of 2015 such a number was nearly 2 million workers, with average time spent unemployed of 28 weeks. This number of workers that are in long-term unemployment is three times less than in 2010-2012, but the period of being unemployment is decreasing not in the same way – in those years it was 38-40 week on average. Still, decreasing level of long-term unemployment gives the possibility to be more optimistic in case of Labor market development.
Even more optimism could be seen if we look on job growth statistic. From 2008 till 2011 the US Labor market had been losing nearly 300,000 monthly. But after this period, the job growth has been recovered and since 2011 the private sector gives on average 200,000 new jobs monthly.
Income Inequality Analysis
Income inequality is an important issue of analyzing not only Labor market, but the whole economy as well. As for USA, the income inequality has a stable trend for few past decades. Unfortunately, the trend in negative and the inequality was widened for the last periods, so there is a lot of work to do.
There are few major indicators that show an Income inequality – Income Share by Income Group, Net Worth Share by Net Worth Group, and Share of All Financial Assets by Net Worth Group. There are also three groups in this kind of analysis – Bottom 50%, Next 45%, and Top 5%. The Income inequality is a difference between these three groups.
As for Income Share by Income Group, the Bottom 50% have nearly 17% of all income in 2015, Next 45% - almost 50%, and the Top 5% - the rest 34%. The trend in this indicator is negative for last few years – for example, the situation in 2004 was the next: Bottom 50% - 18%, Next 45% - 52%, Top 5% - 30%. The same situation is in two other indicators. In 2015 (2004) the shares in Net Worth were the next: Bottom 50% - 2% (5%), Next 45% - 35% (40%), Top 5% - 63% (55%). As for Share of All Financial Assets by Net Worth Group: Bottom 50% - 2% (3% in 2004), Next 45% - 35% (40%), Top 5% - 63% (57%).
Wages Overview
Wages are an important dimension of Labor market as well. If we look on past 10 years of US Labor market, we will see that there are two periods as well as for other main indicators, and these periods are divided by economic crisis of 2008-2010. Before the crisis the average annual wages growth rate was nearly 5%. In 2009 the decreasing was -6%, in 2010 – minus 5%, in 2011 – plus 1%. 2011 was the year of recovery’s start. After the 2011 the average annual wages growth rate is nearly 4%, according to U.S. Bureau of Economic Analysis.
The average wage in USA at the beginning of 2016 was nearly 22 $ per hour (comparing to 18 $\hour in 2006). According to the latest report of Wageindicator Foundation, an average monthly wage of low-skilled worker at the beginning of 2016 was nearly $1,700, and $4,100 for high-skilled workers. Also, an important field of analysis is gender pay gap. In 2014 the women’s median earnings was on the level of 79% of men’s median income. Of course, it is better than in the beginning of 2000 (with 70% level), but it still need improvement.
Conclusion
The US Labor market has two main periods in the past two decades that are divided by financial crisis of 2008-2012. The period before the crisis could be described as a stable part of labor market’s development. Relatively low unemployment rate and high participation rate combined with a stable job and wages growth had formed a good opportunities for market development. Unfortunately, economic crisis destroyed this market stability – jobs’ number decreasing, high unemployment rate (especially, long-term unemployment), income inequality – all these negative factors broke up the positive market’s trend.
As for nowadays, the market looks fully recovered if we look on figures, but it will be a huge mistake. Despite the same level of unemployment rate and wages growth, there are still significant problems with participation rates (employment rate), especially youth unemployment. Moreover, the problem of long-term unemployment could play a negative role in labor market’s recovery.
All in all, the US labor is on a recovery mode, and despite some problems, it reached almost the same level as before the crisis, and a positive trends in all major indicators allow to look in the future in an optimistic way.
REFERENCES
Madowitz, M. (2016) The State of the U.S. Labor Market: Pre-January 2016 Jobs Release. Center for American Progress. Retrieved from: https://www.americanprogress.org/issues/economy/news/2016/01/07/128377/the-state-of-the-u-s-labor-market-pre-january-2016-jobs-release/
Economist.com (2015) America's labor market. The economy doesn’t matter. Retrieved from: http://www.economist.com/blogs/freeexchange/2015/04/americas-labour-market
Frbatlanta.org (2015) Divergents: Wealth and Income Inequality in the United States. Retrieved from: http://www.bls.gov/opub/mlr/2015/beyond-bls/pdf/the-growth-of-income-inequality-in-the-united-states.pdf
bls.gov (2016) Labor Force Statistics from the Current Population Survey. Retrieved from: http://www.bls.gov/cps/cpsaat39.htm
