Across the country, college students are walking across the aisle, grabbing their diplomas and coming face to face with a stark reality: finding a job today is still tough. With the release of April’s unemployment numbers from the Bureau of Labor Statistics, we thought we’d help you understand why the job market might not be measuring up to your expectations — and what it actually means for you.
If reports are to be believed, then the US economy is continuing its recovery… a little.
Overall, the official unemployment figure dropped from 5.5 percent to 5.4 percent, while average hourly wages continued their sluggish rise, increasing just 0.1 percent in April. Many cite slow wage growth as the reason that the US economy just isn’t bouncing back like it used to.
And they’re right. But it’s not that simple.
A Complex Figure
Let’s get one thing out of the way: it’s a good thing that the unemployment rate is falling. It means that, in some capacity, people are finding jobs at a faster rate than new people are aging into the labor market.
And it’s not like wages aren’t growing at all. The most recent increase in wages would mean that wages for all workers will have increased at 2.2 percent for the year. That’s not great, but it’s also faster than the rate of inflation. That means that, were you a worker who never got a promotion, over the course of your tenure at a company, you would wind up earning more in real dollars (that is, in dollars adjusted for inflation) than you started.
Other indicators of economic health, such as Gross Domestic Product, which surged last year, have been weak lately as well. In fact, it’s entirely possible that the latest measures of GDP will show that the economy actually contracted a bit since the beginning of 2015. Feel free to panic, but just for a minute. Because…
Starts and stops are pretty regular when it comes to economic growth. While it’d be awesome if the US economy continued on an upward trajectory forever, that’s also completely impossible. In fact, over the course of this recovery, GDP has normally fallen or stagnated during the first quarter of the year.
So, while this may not be the best jobs report that we’ve seen in years, it’s also not a sign of a faltering economy. As Neil Erwin writes over at the Times,
If the economy really were flatlining, we would expect job growth to slow more considerably than it has in the last few months. If the economy were truly sputtering, the unemployment rate probably wouldn’t keep falling and wage growth wouldn’t be so steady (if uninspiring).
An Increasingly Complex Job Market
So what’s going on?
In a paper released a few months ago, professors Henry Siu and Nir Jaimovich argue that routine jobs, or those that are “rule” based – think assembly line workers or mail sorters – have been automated away. Those jobs are unlikely to ever come back. The following chart shows how routine jobs have fallen off:
Non-routine jobs, on the other hand – both high-skilled jobs, like computer programmers, as well as those that require less technical skills, like janitors – were not as severely impacted by the recession.
Bear with me for two more charts and I promise we’ll be done with them. The next charts compare the recovery from the 1970 recession to the latest recession. In both charts, the blue line represents routine occupations, while the red line is for non-routine jobs. The highlighted area is the period of actual recession.
In both cases, non-routine jobs take a hit following the recession, but remain fairly constant. Routine jobs, on the other hand, take a beating. The difference today is, there are no signs of routine jobs bouncing back like they did 40 years ago.
We can take a few things away from all of this:
1.) It makes sense that wages aren’t bouncing back like they used to. Competition for the remaining repetitive jobs is likely to remain high for quite some time. Employers can pay less when there are more people competing for jobs. The uncertainty in the labor market may also be helping to keep down wages across all sectors.
2.) For recent grads, this is probably the best economic climate to be graduating into lately (unless you’re a petroleum engineer). While the job market might be more tepid than you’d like for it to be, it’s also in the best shape that it’s been in since 2009. And unemployment for those with a B.A. or higher has sat below 3 percent for some time — a condition that remained unchanged this month.
3.) The decline in routine jobs is going to continue to be an issue, regardless of how well the economy recovers. Technological innovation and automation are going to continue driving up productivity and replacing human workers. And the jobs that are destroyed aren’t only in manufacturing — routine jobs include lots of administrative and professional services.
What’re your thoughts? Do you have a job lined up after graduation? Let us know in the comments.