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Jobs Report: Despite Signs Of Progress, Many Still 'Disconnected From Workforce'

Jobs Report

First Posted: 02/ 3/2012 12:46 pm Updated: 02/ 7/2012 6:26 pm

In January, the U.S. added 243,000 jobs, the Bureau of Labor Statistics reported on Friday, and Glerisse Rodriguez, 26, got one of them -- but she still has a long way to go until she bounces back financially from getting laid off.

Late last month, Rodriguez started working in bookkeeping at Jacques Torres Chocolates, a New York-based chocolatier. She's thrilled about the new work, but she is starting out at about half of what she earned a year and a half ago, when she was laid off from her last bookkeeping position. She is also about $9,000 dollars in debt, from leftover student loans and from months when she was trying to support herself and her young son on credit cards and unemployment checks.

"It's like I told my mom: 'I can't be that choosy or that picky right now. I've been out of work for a long time and people are going to try to cut my pay and I have to accept that," Rodriguez said. "Still, I feel like I'm coming home."

On Friday, the Labor Department report -- which showed that the unemployment rate dropped to 8.3 percent from 8.5 -- painted a resoundingly positive, expectation-beating picture of the job market. But for the economy as a whole -- and for many Americans -- there is still a steep road before a full recovery will be at hand.

And while many headlines -- and the White House -- are trumpeting the report as a sign that a robust recovery is truly taking hold, some economists are greeting it with a measure of skepticism.

For one thing, even at this rate of growth, economists estimate it would take some seven years and 10 million additional jobs to return to pre-recession levels of unemployment. And although 243,000 new jobs is an unquestionably positive development, and comes on the heels of two previous months of good numbers (both revised upwards in this report), there are still 5.5 million Americans who have been out of work for six months or more. There are also some three to five million additional people who are no longer counted as unemployed because, sometime during the course of the deep recession and the painfully slow recovery that followed, they gave up looking.

The pool of "missing" workers has not been this large since the government began recording this measure, economists estimate. If all of these workers resumed looking for jobs, the unemployment rate could sit above 10 percent.

"This report is encouraging, but it still underscores how far a distance we have to go and how many people are still long-term unemployed and disconnected from the workforce," said Harvard economist Lawrence Katz. Plus, Katz said, at the beginning of last year, growth also appeared strong, only to drain away in the spring as oil prices rose, the Middle East erupted, and natural disasters shook Japan.

"Even if we were willing to say that the scars of the Great Recession mean a couple of million people drop out permanently, we still have many years to go before we get back to where we were," he added.

Another concern with the robust picture painted is that the strong numbers sit at odds with other important measures of economic growth -- consensus estimates for the employment picture hovered at about 100,000 fewer jobs than reported on Friday. Real household income and wealth remains stagnant, consumer spending is still weak, the housing market is still sluggish, and uncertainty about Europe prevails. On Thursday, Federal Reserve Chairman Ben Bernanke noted that "the pace of the recovery has been frustratingly slow," as he assured that the Federal Reserve will continue an "accommodative stance on monetary policy."

"The first impression one gets is that something doesn't make sense here, not when the economy is still so weak," said Bernard Baumohl, chief global economist at The Economic Outlook Group. "Something has to give, and I think we're all hoping that these numbers are accurate and sustainable, but we're just not sure."

Job growth came in a broad range of industries: professional and business services added 70,000 jobs in January, while health care -- a steady gainer for the post-recession years -- added 31,000 jobs. Manufacturing added 50,000 jobs, in part because the big three auto makers have begun hiring again. In lower-paying sectors, leisure and hospitality added 44,000 jobs, wholesale trade added 14,000 jobs, construction added 21,000 jobs, and mining added 10,000 jobs.

Average hourly earnings for private-sector workers rose 4 cents in January to $23.29. Though inflation numbers for January have not been released yet, Mark Vitner, senior economist at Wells Fargo Securities, said that real earnings adjusted for inflation likely stayed the same or fell. Stagnant wages are likely to hurt the economic recovery.

"Energy prices and food prices have increased again, and since people have to buy those things, they're going to have to cut back on spending on everything else," Vitner said.

The average workweek for private-sector employees was unchanged in January. Vitner said that this is a warning sign, since "typically employers would increase hours before they increase employment." He noted that this weak demand for hours indicates that job growth is likely to slow in the coming months.

All of this means that although the headline number in Friday's report is strong, those who do have jobs still do not have much bargaining power. With a labor market this weak -- there are still more than four job seekers for every open job -- it is hard to negotiate for raises; for those newly employed, this often means accepting a pay-cut, as Rodriguez did.

She scored her new job after going through training at the Bookkeeping Center in Manhattan, a nonprofit organization that provides low-cost training and assists in job placement.

She said she's relieved after a year and a half of anxiously searching -- a year when she and her young son gave up their apartment, moved in with her father, and learned how to squeeze all unnecessary items from their budget -- but she acknowledged that she's not out of the woods yet. She has no immediate plans to move out on her own, and is keeping her budget as bare bones as possible.

"It's hard with that kind of pay, when you're used to making so much more," Rodriguez said. "But I've pretty much figured out a way to just manage my money with what is coming in."

At her last job, she earned nearly $40,000 a year. Now, she's earning about $480 a week -- a little more than 20,000 a year -- paid to her by the Bookkeeping Company of New York City, which partners with the Bookkeeping Center, until she is hired permanently.

Mathew Heggem, president of the Bookkeeping Company, said that he expects Rodriguez to get a wage increase soon, once Jacques Torres Chocolates gives her a permanent position. He added that he plans to advocate on her behalf in her negotiations over compensation. Her final wages, Heggem estimates, could exceed what she was earning previously.

Heggem also said that in recent months, he has seen a pickup in requests for bookkeepers, but that many employers are set on paying lower wages.

"People are really looking for more help in bookkeeping," Heggem said, "unfortunately they're also looking to pay a lot less for talent."

CORRECTION: This article has been updated to reflect that Mathew Heggem is the president of the Bookkeeping Company, not the Bookkeeping Center, and that Glerisse Rodriguez is paid by the Bookkeeping Company.
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