Saturday, September 19, 2009

Leonhardt: Wages Grow for Those With Jobs

by Calculated Risk on 9/19/2009 08:36:00 AM

I've been asked many times what people should do financially during a recession. My first answer has always been "Keep your job if you can!"

Earlier this week, David Leonhardt at the NY Times wrote: Wages Grow for Those With Jobs, New Figures Show

Even though unemployment has reached its highest level in 26 years, most workers have received a raise over the last year.

That contrast highlights what I think is one of the more overlooked features of the Great Recession. In the job market, at least, the recession’s pain has been unusually concentrated.
People who have lost their jobs are struggling terribly to find new ones. Since the downturn began in 2007, companies have been extremely reluctant to hire new workers, and few new companies have started. The economy and the job market are churning very slowly.
Try thinking of it this way: All of the unemployed people in the country are gathered in a huge gymnasium that’s been turned into a job search center. The fact that this recession is the worst in a generation means that there are many, many people in the gym. The fact that the economy is churning so slowly means that there is not much traffic into and out of the gym.

If you’re inside, you will have a hard time getting out. Yet if you’re lucky enough to be outside the gym, you will probably be able to stay there. The consequences of a job loss are terribly high, but — given that the unemployment rate is almost 10 percent — the odds of job loss are surprisingly low.
From an earlier post, here is a graph of hires and separations from the BLS "Job Openings and Labor Turnover Survey" (JOLTS) survey. The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers.

Note: Remember the CES (Current Employment Statistics, payroll survey) is for positions, the CPS (Current Population Survey, commonly called the household survey) is for people. See Jobs and the Unemployment Rate for a comparison of the two surveys.

The following graph shows hires (Green Line), Quits (blue bars) and Layoff, Discharges and other (red bars) from the JOLTS. Red and blue added together equals total separations. Unfortunately this is a new series and only started in December 2000.

Job Openings and Labor Turnover Survey Click on graph for larger image in new window.

Notice that hires (green line) and separations (red and blue together) are pretty close each month. When the green line is above total separations, the economy is adding net jobs, when the green line is below total separations, the economy is losing net jobs.

Total separation and hires have both declined recently - the lower "churn" that Leonhardt discusses, and the reason so many people are stuck in the "gymnasium".