Women and African Americans dropped out of the labor market offsetting the number of people who claimed that they were unemployed. Women and African Americans are giving up on finding a job, as wages remain very low says AFL-CIO Chief Economist
SHARMINI PERIES: It’s The Real News Network. I’m Sharmini Peries, coming to you from Baltimore.
The month of May jobs report just came out, and it is a big disappointment for those looking for jobs, and for ordinary people and families. Only 75,000 jobs were created in the U.S. in the entire month of May, much below the expected 180,000. Could this mean that the market boom of 2018 has come to an end, and that Trump’s economic policies have achieved what it could? And now the impact of the trade war with China is starting to kick in. A year ago, Trump was taking credit for creating jobs and lowering unemployment. Let’s listen.
DONALD TRUMP: We’ve created 3.4 million jobs since election day, which nobody can even believe. Nobody believes it. I always say if I would have said that on the campaign trail when I was here or anyplace else, it would have been brutal. They would have said, “How can you possibly say a thing like that?” 3.4 million new jobs. Unemployment claims are at a 45-year low.
SHARMINI PERIES: Could Trump make this claim today? On to talk about all of this with me today is Chief Economist at the AFL-CIO, William Spriggs. He is Professor of Economics at Howard University, and before that he was Assistant Secretary for Policy at the U.S. Department of Labor. Bill, good to have you here.
BILL SPRIGGS: Thank you for having me.
SHARMINI PERIES: All right, Bill, let’s start off with your take on the labor report for me.
BILL SPRIGGS: So I think what we saw in May was the payroll survey catching up with the household survey. They don’t always agree with each other. And back in April, the payroll numbers looked very large, but the household survey looked very discouraging. And now, what we’ve seen in the May payroll numbers is something more in line with what we saw in the April household numbers. So back in April, in the household numbers, the unemployment rate fell, but that was because lots of people dropped out of the labor market and that offset the number of people who newly claimed that they were unemployed. And the household survey we’ve seen among people looking for work, it is becoming more difficult to find work. The share of workers who are long-term unemployed has been going up since January.
The African American unemployment rate had been going up in the early part of the year during the first quarter, and there were these indications that it was harder to find a job. Among women–that’s a very sensitive area of the labor market, the women’s participation rate. So when you look at women who are unemployed when the economy was booming, if you looked at them one month and followed them in the next month, they tended to fall into jobs rather than fall out of the labor force. And now that trend is reversed. Women who were unemployed back in April, in May were far more likely to say, “I’m giving up, there’s no jobs,” than there were women who weren’t able to find jobs. So all of these are indications that hiring has been slowing. Hiring is going to slow, I think, because of the causes of inequality that we see that we just haven’t addressed, and that were exacerbated by the tax cut that Trump put in place.
SHARMINI PERIES: All right. Explain that connection. How does the Trump tax cut–largely to big business and entrepreneurs–impact the current situation we’re seeing, which is declining jobs?
BILL SPRIGGS: So our economy needs everyone gaining in order for it to be a healthy economy. And when too much growth occurs at the top, it twists the market and it bends it away from the kind of mass activities that fuel the economy. The Federal Reserve, in my view, launched raises in their base interest rate too soon, and in the fall the sale automobiles peaked. It has now come back down and employment in the auto sector is frozen. When we look at young students who completed college in 2008 and 2009, this is 10 years later. We should see them forming households, demanding housing. Housing demand has slowed, in large part, again, because of inequality. Their incomes aren’t up, they are heavily set with debt that we put on them through withdrawing support of higher education. And so, these elements of inequality slow growth.
In the retail sector, the need is to have lots of people have rising income because that creates a rising customer base. And instead, what we have seen because of rising inequality is that the customer base isn’t rising. The retail sector has been burdened with large amounts of debt from Wall Street speculators, and the result is that the retail sector has been very weak. Without rising customer bases, hiring in the retail sector has been falling. And in any given month it’s a different sector; in the May report it happened to be the clothing sector. So this weakness really comes from our high level of inequality.
SHARMINI PERIES: Bill, the current employment rate is at 3.6 percent, which many economists would argue that’s not so bad. But listening to your assessment here, because of the inequality, it’s still not good for the economy. There’s no jobs. If there’s no jobs, there’s no purchasing power. If there’s no purchasing power, the economy doesn’t grow, the economy isn’t stimulated. So explain this unemployment rate and the inequality you’re talking about.
BILL SPRIGGS: So the unemployment rate is one measure we have of labor market slack. It’s a difficult measure, because in order to be counted, you have to say, “I’m looking for a job, I’m available for a job.” And what we are finding during this recovery is there are a lot of people who are marginally attached to the labor force that are difficult for us to figure out, “Are you in or are you out?” Just as an example, during the hotter part of this recovery, somewhere around the last two years, people who are not in the labor force–so they’re telling us, “We’re not looking for a job”–the next month we see them and they’re employed. And they’re far more likely to be employed than unemployed. So you’ve got to ask, “Well, if you weren’t even looking, how did you have such success finding the job right off the bat as opposed to being unemployed?”
So I think it’s kind of clear that a lot of those people have their eyeball tilted towards the labor market, seeing how it was going to perform. The labor market isn’t performing very well in terms of higher wages, and that’s keeping us from pulling a lot of workers back in, particularly women because the labor force participation rate for women peaked in 1999-2001. We haven’t seen wage growth since then, and it’s been hard to get women back into the labor force because their wages aren’t being raised enough to augment their household income and we don’t have enough work supports in place to make low wages work for most women.
And so, as a result, if you look at the employment to population ratio, the share of people who are employed, you get a better picture. And so, if you take prime age workers, so we ignore people who are either going to mostly be in school or mostly retired, the employment to population ratio hasn’t returned to its peak level. And so, I think that’s a better indication that we have slack in the labor market. Now, the employment to population ratio for prime age workers has recovered for some groups. For African Americans and for Hispanics it has recovered to the level it was in 2008, but these are still at very low wages. And we are still way behind in getting the share of the labor force employed to be back.
SHARMINI PERIES: All right, Bill. Many economists out there when this report came out blamed the declining job numbers on the tariffs, the tariffs against China in particular. And I guess this is a sensitive issue, given where you are the Chief Economist, the AFL-CIO. Because you have one union sort of pitched against it, another union–as a result of the tariffs–where steel workers have been saying that the Chinese steel is so cheap, tariffs is a good thing. But the auto industry, who rely on manufacturing cars and need steel, is perhaps disappointed because of the cost of the import of the steel now. You seem to think this is an issue of inequality, not necessarily tariffs. So explain that. And then, of course, explain sort of the impact this has on a larger labor union sector.
BILL SPRIGGS: Right. So in 2008, we didn’t just have a financial collapse, we had a collapse in the real economy. The world had an oversupply in several industries. Steel was one of those where there was a huge overcapacity, and unfortunately, we didn’t have countries come to an agreement how we would wind down this overcapacity in steel. And disproportionately, the United States took the brunt of job losses by the United States lowering capacity more than other countries. That creates a dilemma, because even if you put a tariff on it, the United States has lowered its capacity, so it’s not like we could fill the void domestically. And it helps the recovery of U.S. Steel, but it’s not the ideal way to do it because the number one problem U.S. firms face is a very strong dollar.
And the tariffs actually have an effect of digging up the dollar, so they work against the overall interest here. The dollar is way stronger than it needs to be if you’re really thinking of this as being a trade problem–and there is a trade imbalance. So that’s what’s going on when it comes to steel. It’s not boosting jobs as much as we might hope, because we had already reduced capacity too much. But when you look at the numbers, where the weakness is coming from, weakness in auto sales has nothing to do with tariffs.
Weakness in auto sales has to do with the fact that we have a record number of Americans who are behind on their auto loans. And we borrowed a trillion dollars and put that debt on the household sector in order to get the auto industry back up. That was because we’re not seeing incomes rise. So the weakness in the auto market has a lot more to do with not correcting the high level of inequality that we have in our country, and our inability to see workers get raises. The jobs report that came out showed that in May, wages were up 3.1 percent over the year. That’s slower than the 3.4 percent we had seen in April. Both of those numbers are OK numbers, but they’re not very robust. They’re not the kind of wage growth that’s necessary to see incomes rise at the rate they should at this level of unemployment.
SHARMINI PERIES: All right, Bill. Finally, tell us some of the policies that you would try to implement under these circumstances to bridge the inequity gap, as well as obviously to create jobs here.
BILL SPRIGGS: Well, the House has before it legislation that has been introduced to raise the minimum wage to 15 dollars an hour. That’s very important for our economy. We have to get back on a footing of rising wages, and raising them at the bottom has been one of the success stories. And this has been driven by state level policy, we need it to be federal policy. And Congress has before it an act to make it easier for workers to organize. We made it impossible for American workers to organize, and in many of our industries, the only non-union plant in the world for a particular company is in the United States. So for Nissan or Volkswagen, just as an example, these are the only non-union plants that these companies have. Americans are the only ones in the world working for several companies where they don’t have a union, they can’t bargain. That’s a pretty sad statement on our national policy, when the United States government doesn’t take the side of the American worker for foreign companies.
SHARMINI PERIES: All right. To that point of organizing, recently there was a flare-up when people saw the AFL-CIO budget, and I guess the line for organizing the unorganized sector was rather low. How do you explain that?
BILL SPRIGGS: Well, the AFL-CIO itself is the Federation. Workers don’t belong to the AFL-CIO; they belong to individual unions. So what the AFL-CIO as the Federation does is to help facilitate the organizing effort to make sure that the organizing is of unorganized workers, not unions poaching members from each other. So the onus of organizing workers is really an activity that happens within the affiliates. It is something that can be aided by the AFL-CIO, and we do a lot to do that, both by fighting for policies that make it possible to organize workers. Those policies are economic policies to ensure that we push our federal authorities to full employment (it’s far easier to organize workers when you’re at full employment), that boost the minimum wage for all workers. It’s a lot easier to organize workers–particularly because we have so many workers in low wage industries–if they already have a higher wage.
In the United States today, there are almost as many workers in food service as in manufacturing. There are 12.8 million manufacturing workers in the United States, there are 12.1 million who work in food industries, such as fast food workers. So raising the minimum wage to 15 dollars an hour affects as many workers as the entire size of the workforce for manufacturing workers. So these are the types of efforts that take place at the Federation level, by raising wages for all workers by ensuring full employment and by giving information and fighting for policies that can help our affiliates. That’s what happens at the Federation level.
SHARMINI PERIES: All right, Bill. We’ll leave it there, but this was a great analysis and I hope you join us more often here on The Real News Network so we can keep our workers, as well as our viewers, informed about some of these critical issues that otherwise feel somewhat abstract for people. Thank you for joining us.
BILL SPRIGGS: Thank you for having me.
SHARMINI PERIES: And thank you for joining us here on The Real News Network.