In polarized job market, middle class suffers

By Alex Kowalski, (c) 2012, Bloomberg News
Posted April 11, 2012, at 5:44 p.m.

WASHINGTON — Americans at the top and bottom of the income scale are benefiting most from the jobs recovery while those in the middle are getting left behind.

Employees making above-average wages, such as doctors and energy-industry workers, and those at the other extreme, including home-health aides and restaurant staff, have seen outsized gains in hiring since the jobs recovery began in February 2010, say economists at Wells Fargo & Co. and JPMorgan Chase & Co. Professions in the middle, such as financial services and specialty construction, aren’t faring as well.

Such a shortfall helps explain why income gains have yet to return to levels seen before the recession began and why consumer spending over the past two years has grown at the slowest pace of any expansion in the post-World War II era. It also points to a pool of unemployed Americans that will prevent wage increases from flaring out of control and fueling inflation as the economy grows.

“If we’re only creating jobs for the highly skilled and for folks with basic skills, then you’re leaving an awful lot of people behind,” said Mark Vitner, a senior economist at Wells Fargo in Charlotte, N.C. “Until we have broad-based growth, it’s hard to imagine how we can have a self-sustaining economic recovery.”

Shares climbed Wednesday after Alcoa, the first company in the Dow Jones Industrial Average to report quarterly earnings, said it made a profit in the first three months of the year. The Standard & Poor’s 500 Index rose 0.8 percent to 1,369.46 at 11:52 a.m. in New York, snapping a five-day slump.

The highest-paying jobs, which employ about 15 percent of all workers, have accounted for 20 percent of the gains in employment since February 2010, when the jobs recovery began, Wells Fargo calculations show. Those whose average earnings are lower than 60 percent of all employees have accounted for about 46 percent of job growth in the same period.

Middle-income occupations, which employ about 40 percent of all workers, have created about 34 percent of jobs since February 2010, Wells Fargo found.

Measures of household sentiment reflect the composition of job gains. Confidence among those making more than $100,000 a year and for those with annual incomes between $15,000 and $25,000 has improved more in the past six months than for families making from $25,000 to $50,000, figures from the Bloomberg Consumer Comfort Index showed last month.

The divergence in job gains, which extends a pattern that began decades ago, was concentrated during the recession that lasted from December 2007 to June 2009, according to economists Nir Jaimovich and Henry Siu, both members of the National Bureau of Economic Research, the group that determines when economic slumps begin and end.

Jaimovich, a professor at Duke University in Durham, N.C., and Siu of the University of British Columbia in Vancouver, found that 95 percent of the jobs lost during the economic slump were among workers who carried out routine assignments. These jobs, which usually pay average incomes and include office and administrative roles, bank tellers, machine operators and mechanics, disappeared during the recession and show “no recovery to date,” the researchers found.

On the other hand, employment was little changed during or since the recession for a range of positions from computer programmers to bartenders and home health aides, jobs that encompass the high and low ends of the income spectrum and require non-routine skills such as flexibility, problem-solving or human interaction, according to Jaimovich and Siu. Technology allowing businesses to replace routine labor with equipment may explain the lack of middle-income jobs, they wrote in a paper.

Looking at earnings data, Michael Feroli, chief U.S. economist at JPMorgan in New York, also concluded that above- average earners are in demand.

“Employment is shifting toward industries or occupations with relatively high incomes,” Feroli wrote in a March 28 note. Growth in a number of managerial and professional jobs like doctors and college administrators, which pay on average 70 percent more than sales and office occupations, may explain the shift alongside advancements in technology that reduce demand for middle-skilled jobs, he said.

With assistance from Ainhoa Goyeneche in Washington and Aki Ito in San Francisco.

http://bangordailynews.com/2012/04/11/business/in-polarized-job-market-middle-class-suffers/ printed on April 21, 2014