I know there have been a bazillion posts written on the September jobs report. Well, now we can say there are a bazillion and one, but I don't think any of them are going to be like this one. And that is completely intentional.
First, let me just say this report wasn't fudged. Period.
The 873,000 increase in employment from the household survey has been the most widely cited statistic as proof that the numbers are fudged because nobody can believe the economy is growing that fast. After some exhaustive, thorough analysis (i.e. flipping a page or two), you'll see the biggest reasons this number was so high were: 1) the number of temporary workers that didn't lose their jobs
shrank (to the tune of 468,000), and 2) the number of people working part-time for economic reasons
increased by 582,000.
So this report was a celebration of the fact that temp workers weren't tossed out on their collective behinds, and that more people were actually able to find a part-time job even though what they really want is a full-time job. But plenty of people despised the report.
But that's not the main thrust of this post. I want to take a look at something different, something more structural in nature. To do that, let's look at this first chart. It's a chart that just calculates the spread in unemployment rates between college graduates and those that didn't finish high school. Unfortunately the data only goes back to 1992 so we can't see what this spread was before the dot-com era.
At any rate, you can see the recession and the recovery haven't treated these groups equally.
But now let's take a look at wages. One of the longest data series the BLS has is the average weekly earnings of production and non-supervisory employees, so I used that. If we take a look at that series, we see year-over-year changes in weekly earnings have been largely range-bound. For almost 30 years:
If you focus on the past few years, wage growth has been falling for almost two years. But as the first chart shows, the college graduates are the ones who have been finding jobs in this economy. And we know the biggest contributors to job growth in the Establishment Survey have been health-care-related professions and other professional services sectors of the economy as well as temporary workers. So what does that mash-up of the Household and Establishment Survey data points say? Simply, the return on higher education is not as high as many think. And to be truthful, this isn't new. The meme of the Starbucks
(NASDAQ:SBUX) barista with a college degree actually started in the recovery at the end of Bush 41's presidency and the beginning of Clinton's. Remember those slacker movies Reality Bites
, and Clerks
? All by-products of a recession from 20 years ago. We've glossed over that fact, or just plain forgotten it with the ebullient social mood that prevailed during the dot-com era. But, we can't go back to Eden. Creative destruction is like a honey badger that way.
Which means that sanitation worker in your neighborhood may very well be quoting Yeats or Longfellow. Or even Schumpeter or Descartes. The world changed on us while we were investing in Internet stocks and buying gargantuan McMansions over the past 15 years, and the inter-generational dialogue of what this change actually means
never took place.
We have more people on this planet with a college education than at any time in human history. But with wages stagnant, that means there will be more educated people across all different sectors of this economy willing to work for the same amount of money because they have those student loans to pay off, which are growing with each passing month. Just look at the Fed's Consumer Credit release
All of this points to one irrefutable conclusion: Something's gotta give. Either we are going to try and re-engineer how our economy operates so that a college education isn't the only meal ticket to being a productive member of society (provided you are able to find work you want to do and can do), or we're going to have some nasty consequences such as larger, deeper income gaps and a stratified society; one you'd probably call neo-caste or nouveau-caste, where everyone just deals with people in their own local social strata. And the higher-level castes treat the lower-level ones like diseased vermin.
If we act decisively and quickly we can come out on the other side of this period in our history as a better nation and society. A caste-like society doesn't have to be around the corner for us, if we don't want it to be. But if we fail to act, well, history is littered with the ruins of fallen nations. The choice is ours.
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