Economy’s new jobs are paying less, analysts say

— Amy Valle is caught in a labormarket recovery that’s forcing some Americans to settle for less. Before she lost her job as a full-time health-department caseworker in November, she was making $23 an hour. Now she’s paid $10 an hour as a part-time assistant coordinator in an after-school program.

“From here on out, it will be a struggle,” said Valle, 32, of Oswego, Ill., whose husband lost his $50,000 government job and still is out of work after a year. “I don’t feel like there’s anyplace we can go to get what we were getting paid.”

The improvement in the unemployment rate to 9 percent in January from a two-decade peak of 10.1 percent in October 2009 masks a new reality: Many of the jobs people are taking as the economy rebounds offer lower pay, fewer hours and worse benefits than some of the 8.75 million positionsthat disappeared because of the recession, said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

This may restrain income growth, limiting bigger gains in consumer spending, which accounts for about 70 percent of the U.S. economy. It also underscores Federal Reserve Chairman Ben Bernanke’s contention that wages, which increased 1.7 percent on an average hourly basis last year, have acted as a constraint on inflation, allowing the central bank to keep interest rates at record lows to sustain growth.

“In the last recovery, we were adding management jobs at this point, and this time it’s disappointing,” said Ashworth, who published a report Jan. 27 about pre- and post-slump employment based on data from the Bureau of Labor Statistics. “The very best jobs, we’re still losing those.”

Projections from the bureau reinforce his analysis. While the number of openings for food preparation andserving workers, including those at fast-food restaurants, will grow by 394,300 in the decade ending in 2018, the median wage is only $16,430 including tips, based on 2008 data. Meanwhile the number of posts for financial examiners, who earn $70,930, will expand by just 11,100.

“We have to be sad that the economy has suffered a diminution of its power to create high-paying and more interesting jobs,” said Edmund Phelps, who won the Nobel Prize for economics in 2006 and directs the Center on Capitalism and Society at Columbia University in New York.

Lowe’s, the second-largest U.S. home-improvement retailer, typifies the reshuffling of the U.S. work force. The Mooresville, N.C.-based chain said Jan. 25 that it is eliminating 1,700 managers responsible for store operations, sales and administration as profit growth trails that of larger Home Depot Inc. in Atlanta. Meanwhile, Lowe’s said it will add 8,000 to 10,000 weekend sales positions and is creatinga new assistant store manager position.

Such shifts are one reason why many households remain frugal, even as their spending is forecast to grow 3.2 percent this year, compared with 1.8 percent in 2010, according to the median forecast of economists surveyed by Bloomberg News from Feb. 2-8. A morerobust labor market would provide an even bigger lift, Ashworth says.

“In addition to the paucity of net jobs being created, the poor quality of those jobs is another reason to expect income growth to remain muted, which in turn will constrain consumption,” he wrote in the Jan. 27 report.

In Oswego, Valle is having trouble keeping up with the monthly bills now that she’s earning much less than the $41,860 a year she got at her old job. She has eliminated the telephone landline, cut back on cable TV and reduced food spending.

“We can maintain like this for a while, but I’ll get really nervous if my husband has his unemployment insurancetaken away,” she said.

Even though the economy began expanding in the third quarter of 2009, private employers continued to cut workers through February 2010. Companies last year eliminated about 550,000 jobs in management and 250,000 in construction, occupations with average hourly salaries of $38.34 and $21.03 respectively, according to Ashworth. In the same period, businesses added about 900,000 positions in production and 500,000 in services, which average $16.27 and $11.57, respectively.

The trend is troubling for the country’s long-term prospects, Phelps said.

“Businesses aren’t innovating as much, they’re not as forward-looking as they used to be,” so companies that “find a reason to pay pretty well just don’t seem to require all those relatively high-paid workers they once did,” he said.

Michael Greenstone, a former staff member for the White House Council of Economic Advisers, said it’s premature to “make too much of where the particular job creation is occurring,” because the “immediate issue is that there are too many people” out of work.

“I’m not in favor of ditchdigging, but the first thing is to get more people employed,” said Greenstone, an economics professor at the Massachusetts Institute of Technology and director of the Brookings Institution’s Hamilton Project in Washington. “Unemployment is a scourge of society right now, and it has to be the front-andcenter issue.”

Dennis Jacobe, chief economist for Washington-based Gallup, said a survey last month showed job hunters are adapting to the new reality, with 60 percent preparedto settle for a full-time position they don’t really want. The consulting and research firm is best known for the polls it has conducted for more than half a century.

Information for this article was provided by Tim Jones and Chris Burritt of Bloomberg News.

Business, Pages 49 on 02/27/2011

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