06/19/2015 04:18 pm ET | Updated Jun 17, 2016

A Job Is Not a Job Is Not a Job

One of the really good things that David Stockman does in his Contra Corner blog is dissecting incoming economic statistics. One of his favourite targets is the monthly non-farm employment figures produced by the US Bureau of Labor Statistics. Here is his take on the May figures.

I won't summarize the entire article, which is worth a read. His general thrust is that many of the new jobs trumpeted by the Obama administration, Keynesian economists and the Federal Reserve are in fact "job-lettes." For example, of the 3.3 million new jobs created since the pre-recession peak, 1.6 million are in the leisure and hospitality sectors (ie., waiters, bell-boys, and ticket takers, as well as the employees of the exploding nail salon industry, where employment has nearly quadrupled since 2000). A combination of low pay and limited hours produce annual average earnings in these sectors of less than $20,000.

Another big slug of employment growth is in sectors that Stockman deems "fiscally dependent" and therefore unsustainable, in his view, given the US debt position. This category obviously includes government employees, but less obviously the education and medical sectors, which are massively dependent on government transfers. These jobs are full time, but also relatively low pay.

Stockman contrasts this with the "goods producing sector," which produces full-time jobs at a living wage, but where employment is still 2.4 million below its pre-recession peak. All of this is summarized in a single statistic, which is the total number of labour hours worked in the economy. This shows that total labour inputs into our economy are still marginally below there Q2 2007 peak, even though the US population has grown by about 20 million since this time.

Stockman's narrative explains very well a couple of the economic mysteries of our times. The first is slow wage growth despite a low headline unemployment rate. This is not surprising if today's unemployment rate is flattered by low-quality jobs; these marginally employed people would happily move into better jobs, which limits the negotiating power of higher-wage employees. The narrative also helps explain the low growth of labour productivity. If much of the new labour input is in sectors with low productivity, then this will bring down the overall average, even if sector productivity is advancing smartly. (The mathematics of this are a bit like the famous gibe from New Zealand's former Prime Minister Robert Muldoon: "New Zealanders who emigrate to Australia raise the average IQ of both countries.")

For Stockman, this calls into question, among other things, the Federal Reserve's extremely aggressive monetary policies. It shows how little has been accomplished by these policies, at the great costs of inflating asset bubbles and exacerbating income inequality (which even the Federal Reserve and George Stiglitz are finally acknowledging).