7-22-05, 8:55 am

It’s easy to understand why the Bush administration has remained silent about the issue of slow job growth and the staggering number of long-term unemployed. Slack labor markets and ongoing unemployment best serve the interests of the administration and the corporate community at this particular economic juncture.

From an employer’s perspective, the current levels of unemployment are optimal — high enough to suppress wages and inflation, but low enough to preserve consumer spending and economic growth.

The primary function of ongoing unemployment at this stage of the recovery is to hold down wages and reset labor costs at a permanently lower level. Real wages have declined in three of the past six months, continuing a trend toward significantly lower labor costs that began in the wake of the 2001 recession.

Over the past year, average hourly earnings have increased only 2.7 percent, below the rate of inflation.

The voluntary quit rate — the share of workers who leave their jobs voluntarily — is at its lowest point for the year and at a historically low level, indicating that workers are not willing to leave their jobs in search of better pay.

For the past year, the number of monthly mass layoffs has remained in the 1,100 to 1,400 range, high enough to undercut workers’ confidence in their ability to change jobs.

As long as job growth remains low, workers will not press for higher wages, inflation will remain tame, employers will be able to boost profitability, and the Bush administration will solidify its support from the business sector.

Labor cost savings are flowing directly into higher profits for companies. Corporate profits for the first quarter of this year were up 25.2 percent from the same quarter a year ago.

Only 146,000 jobs were created in June, well below forecasts for the month. For the first half of this year, job growth has averaged 176,000 jobs per month, not enough to absorb new entrants and reabsorb the unemployed.

A significant portion of an entire generation of young adults — the largest group of new entrants — remains without work, with an official unemployment rate of 16.4 percent. The actual rate is easily double that.

The official overall unemployment rate dropped from 5.1 percent in May to 5.0 percent in June only because fewer workers entered the labor market in search of work.

The total unemployment rate stood at 9.0 percent. This rate represents the unemployed, plus discouraged workers, plus the underemployed — those working part-time because they cannot find full-time work.

Black workers continue to experience unemployment rates that are more than double the rates for white, Hispanic and Asian workers. Employment for white, Hispanic and Asian minority group workers grew in June, while the unemployment rate for black workers actually increased to 10.3 percent, up from 10.1 percent in May.

Employment and job growth has been relatively strong for the most vocal and politically active segment of the population. At the top of the occupational ladder, management and professional employees are fully employed, with unemployment at only 2.6 percent for this politically influential group.

In the service and production occupations, unemployment is 6.3 percent, more than double the rate for high-end white-collar workers.

Given the employer objective of resetting labor costs with a broad stroke, the right jobs are disappearing. An additional 24,000 relatively high-wage manufacturing jobs vanished in June, the largest monthly loss in 2005. Three-fourths of these jobs were in motor vehicles and parts.

Over the past year, 74,000 manufacturing jobs have been lost. These jobs typically pay higher wages and benefits and exert upward pressure on wages in the communities where they are based.

The greatest job growth occurred in administrative and support services, health care and food services, where compensation is much lower than in manufacturing.

High oil prices, the recent rise in the dollar and ongoing mismanagement in the auto industry will continue to erode manufacturing employment through the end of the year. Although the heaviest job losses are in auto production, the electrical equipment and paper industries are also shedding jobs, along with the trade-damaged textile sector.

In June, Economy.com put the risk of a recession occurring within the next six months at 30.7 percent, the highest risk level reported for any month this year. With long periods of low job growth and high rates of long-term unemployment already in place, the next downturn will bring higher than normal rates of joblessness and another huge cut in real wage rates.

From Labor Research Association