Slow Recovery in Wages and Salaries Continues despite Strong Jobs Growth

By Henry, LaVaughn M. | Economic Trends, November 2014 | Go to article overview

Slow Recovery in Wages and Salaries Continues despite Strong Jobs Growth


Henry, LaVaughn M., Economic Trends


11.05.14

After enduring the worst recession since the Great Depression and seeing higher levels of unemployment than at any other point in their lifetime, Americans have been finding jobs at an increasing rate. However, the workplaces to which they are returning look very different from the ones that they participated in prior to the Great Recession. Most strikingly, many of the sectors that lost jobs before or during the recession are not those that are gaining jobs now. And wages and salaries tend to be growing slowest in the sectors gaining the most jobs and fastest in those gaining the fewest.

During the pre-recession period of 2002-2007, total nonfarm employment grew by 7.4 million workers. This growth was strongly concentrated in the private services-producing sector, and to a lesser extent in the government sector. During this period, these sectors grew by 7.5 million and 1 million workers, respectively. Conversely, the goods-producing sector, primarily composed of workers in mining and logging, construction, and manufacturing, saw their employment numbers decline by 1.1 million. Manufacturing alone lost 2.0 million jobs. (By way of historical comparison, the manufacturing sector as a percent of total private sector employment has declined from a high of approximately 37 percent immediately following World War II to approximately 10 percent today.)

Both before and after the Great Recession (2008:Q1 to 2009:Q2), service sectors have fared best. Specifically, jobs growth in professional and business services has almost reached 3 million in the recovery, eclipsing the sector's pre-recession growth of 2 million jobs over a comparable period (five years). Similarly, growth remains strong in the education and health services sector and the leisure and hospitality sector. Collectively, these three sectors have seen total job growth of 6.6 million in the recovery period, slightly surpassing the 6.3 million jobs gained in the pre-recession period. Conversely, due to the onset of fiscal restraint at all levels of government, the government sector has actually lost 665,000 jobs in the recovery, while it gained 1 million in the pre-recession period.

Meanwhile, wage and salary growth evolved quite differently. During the pre-recession period, real wages and salaries, as measured in 2001 dollars, were growing at an average annual rate of approximately 0.9 percent across all sectors. The variation between sectors was fairly tight with wages in the goods-producing sector growing at a 1 percent rate while the service sector was growing at approximately a 0. …

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Slow Recovery in Wages and Salaries Continues despite Strong Jobs Growth
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