The United States added 196,000 jobs in the month of March, and the unemployment rate remained flat at an historic low of 3.8%, according to Friday’s jobs report.
The U.S. economy, based on the data supplied by the Bureau of Labor Statistics, is in the midst of one of the longest-lasting job and growth expansions on record. From the depths of despair after the financial crisis in 2009 to the zenith of the BLS report, the unemployment rate has, thankfully, dramatically dropped from 10% to only 3.8%. To put these numbers into perspective, economists claim that 5% unemployment is considered full employment, as there will always be a certain number of people who are between jobs for nonstructural issues.
Today, the mass media is uncorking the champagne bottles to toast our roaringly successful economy. You know that the jobs report is well received when publications known for their anti-Trump rhetoric, such as the New York Times, offer rave reviews of the employment data. I’d suggest that you hold off on the celebration and put the champagne glasses back into the cupboard.
While the numbers seem terrific, there is danger lurking on the not-so-far-off horizon. The collective high-fives and back-patting by the media and government officials can be dangerous, as it make us complacent. The collective wisdom is, “Why should we worry about the future if the present looks so great?” Unfortunately, we are being shortsighted by only looking at a current snapshot in time and not focusing our attention on rapidly emerging trends, which could knock the legs out from under the job market.
The Aspen Institute, a nonpartisan think tank, recently published a report about the disconcerting wave of automation that’s likely to destroy jobs and devastate communities in major sections of the country.
This inevitable tsunami of technological disruption is ignored and invisible against the bulwark of seemingly strong jobs growth. According to the study, economists worry that financial inequality will widen without any proactive actions taken. Artificial intelligence, machine learning and sophisticated robotics possess the potential to automate tasks currently performed by workers. This could devastate employees in jobs with rote aspects that can easily be replaced.
From the data below, it seems that a large portion of the growth is focused on areas like healthcare and the services industry, which are known for having low-skilled workers who can be relatively easily replaced by emerging technologies. Manufacturing jobs have not participated in job growth and have seen declines. New-age robotics, such as those created by Boston Dynamics, will further decimate manufacturing jobs. If you watch the videos made by Boston Dynamics, you’ll quickly realize that a human worker can’t possibly compete with these sophisticated and agile robots.
Lost in the revelry is the fact that wage growth for March was anemic. A tight job market caused by record-high employment should reflect increases in compensation for workers. Companies would need to pay more to attract job applicants and keep valued employees from leaving. This is not reflected in the data. It could be, in part, due to recognition that many people can be replaced by technology in the near term and, therefore, corporations don’t feel the pressure to spend on staff that may not be required down the road.
Automation is going to hit workers in three waves, and the first one is already here, according to PwC economists. The “waves” will wash over us in the following ways: a flood of algorithms, augmentation inundation and an autonomy tsunami will replace a wide swath of jobs in a wide array of industries—ranging from self-driving cars to financial services.
Racial and gender inequality may be exacerbated by this wave, as women and minority groups that work in lower-skilled jobs in certain sectors will be replaced by automation, according to the Institute for Public Policy Research.
According to PwC, the first two waves will more adversely impact women—putting potentially 23% of jobs at risk. The the third wave will hit men more severely, as by the mid-2030s, 34% of jobs usually held by males are at risk of automation.
With this backdrop in mind, here are some key takeaways from the data:
- Payrolls grew by 196,000 and the unemployment rate stayed at a flat 3.8%.
- Interestingly, wage gains were only 0.14% for the month.
- The March numbers far surpassed the 33,000 jobs added in February.
- The underemployment rate is unchanged at 7.3%. This includes part-time workers who would like to have a full-time position and those who want a job, but have given up active searches for suitable employment.
- The unemployment rate data, broken down for various groups, include: Adult Men (3.6 %), Adult Women (3.3%), Teenagers (12.8%), Whites (3.4%), Blacks (6.7%), Asians (3.1%) and Hispanics (4.7%) showed little to no change in March.
- The number of long-term unemployed (those jobless for 27 weeks or longer) was unchanged at 1.3 million and accounted for 21.1% of the unemployed.
- The number of involuntarily part-time workers was little changed at 4.5 million in March. These individuals preferred full-time employment, but were working part-time because their hours had been reduced or they were unable to find full-time jobs.
- In March, 1.4 million persons were marginally attached to the labor force. These individuals are not in the labor force, but have the desire and ability to work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the four weeks preceding the survey.
- There were 412,000 discouraged workers in March, about unchanged from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 944,000 persons marginally attached to the labor force in March had not searched for work for various reasons, such as school attendance or family responsibilities.
- Healthcare led with 49,000 new workers, professional and technical services 34,000 and restaurants and bars contributed 27,000. Construction rose by 16,000, but manufacturing lost 6,000 jobs.
I’m not trying to depict a dystopian future for the U.S. job market, but rather alert you to the potential problems that we need to deal with before it’s too late. We must not let ourselves become both blinded and complacent in the instant gratification of the current good news.