While a year ago at this time, the three-month average of nonfarm job creation was 211,000, it is now just 116,000 (142,000 in August), compared to a long-term norm of about 190,000 jobs per month.
Meanwhile, the data for June and July were revised downward by 86,000 jobs (from 293,000 for the two months to 207,000 employed).
Percentage Assessment of Job Growth
It’s still better to assess job growth as a percentage because, as the economy and population grow, more absolute employment growth is needed to achieve a comparable impact. The three-month average is 0.07% per month, the annual average is 0.11%, and the 12-month average is 0.12%. In contrast, the medium-term average before the onset of COVID-19 (2017 – 2019) was 0.13% per month, and the long-term average over 10 years was 0.16%.
Emerging Warning Signs
The visible deterioration began in June, and the data show that job creation is performing at about half the rate of the long-term trend. While it’s not a crisis (which would require at least three months of employment contraction) or a recession (characterized by a rate of about 0.03% per month on average over 3 – 6 months), it is the first warning sign.
It is important to note the structural degradation:
- Native Americans have lost about 1.5 million jobs since the beginning of 2020, with these jobs being replaced by more than 3 million migrants (mostly from Mexico).
- More than 2 million part-time (low-wage) jobs have emerged in the last year, while nearly 1.5 million full-time jobs have been lost.
Where is job growth concentrated? Over the past year, 85% of service sector jobs have been concentrated in health care, trade, food service, and entertainment — mostly low-wage jobs — while the IT sector is shrinking in employment, and banks and professional and business services (the highest-paying sectors) are experiencing their slowest growth rates since early 2008.
Conclusion
The current trends in the U.S. labor market reveal an alarming degradation characterized by a decline in job creation and a shift to low-wage, part-time employment. Structural changes, such as the displacement of Native Americans by migrants and the loss of full-time positions in favor of part-time positions, underscore the challenges facing the labor force. While the situation has not yet reached the level of a full-blown crisis or recession, the warning signs are clear.