In recent months, analysts have been pointing to a supposedly improved job situation for workers. Voluntary minimum wage increases at companies like Walmart allegedly pointed to an upward movement in wages due to increased competition. Workers purportedly were feeling more secure in their jobs and more willing to explore new possibilities. Despite a first quarter slide in economic growth, the economy was apparently poised to bounce back. The proverbial ‘rosy scenario’ was finally appearing on the horizon.
Much of this optimism, however, was surprising news to the middle class, and today’s jobs report showed why. The headline — 220,000 new jobs and the unemployment rate dropping to 5.3 percent — appeared to confirm the ‘rosy scenario.’ Yet the underlying data present a very different story. These numbers point to an enduring fact of this so-called ‘recovery’ — the middle class has been left behind.
For example, the 220,000 new jobs in June sound like a step towards real improvement. However, when combined with the downward revision of 60,000 over the previous two months, the net creation is only about 160,000. In fact, the average monthly job growth so far this year (208,000) is far below the average in 2014 (260,000). That is hardly anything to write home about and certainly doesn’t deserve glowing media headlines.
Unemployment appears to have fallen, but mostly for the wrong reasons. The underlying numbers reveal a large drop off in people employed or looking for work—more than 400,000 —accounting for much of the decline in the unemployment rate. In fact, the labor participation rate has fallen to its lowest level since 1977. If ‘Ms. Rosy Scenario’ is at hand, why are workers becoming more pessimistic about job prospects?
Wage growth is no cause for celebration either. Even before the impact of inflation, wages are stuck at 2 percent growth. So the middle class family living paycheck to paycheck—if they even have a job—can barely buy more than they could a year ago. Over the last year, middle-income job prospects have barely improved and purchasing power in the supermarket has barely budged. The ‘rosy scenario’ is a lie, and middle class families have been short-changed.
Steve Lonegan is the Director of Monetary Policy for American Principles in Action.