New Study Says Jobs Coming Back, But Lower Pay

A new study for the US Conference of Mayors, conducted by Global Insights, analyzes job loss between 2001-2003 and the expected job gain from 2004 – 2005. Furthermore, the report shows an economic expansion that will end the “jobless recovery” with job growth of 1.3% in 2004 and 1.7% in 2005, resulting in a slowly reduced unemployment rate.

The average wage of new jobs created during the 2004-2005 period is forecast to be $35,855, which is significantly lower than the $43,629 average wage of those jobs lost between 2001-2003, resulting in a wage gap of 18%.

The report says that employment gains will be modest in the fourth quarter of 2003, but this growth will pick up somewhat in 2004, expanding at a rate of more than 1%, which will slowly reduce the unemployment rate. Real GDP will expand by 4.2% in 2004, and 3.7% in 2005, as the US economy achieves its potential rate of expansion for the first time since 2000. This expansion will, at last, end the ‘jobless recovery’, with payroll growth of 1.3% in 2004 and 1.7% in 2005.

In 2004, U.S. employment is expected to recoup the losses experienced over the previous three years. These losses totaled a net 2,380,000 jobs. These job gains, however, will not return in the same sectors where they were lost. Many of these sectors, such as manufacturing and information, have seen these jobs moved overseas due to outsourcing. The average annual wage of jobs in the sectors which lost jobs during the 2001-2003 period, $43,629, will not be matched by the average wage of jobs in the growing sectors between now and 2005, $35,855. Thus job gains will come in sectors whose wages average only 82% of those in the sectors hit hard by the recession.

This gap reflects the higher than average wages paid in the declining manufacturing sectors. Over the 2001-2003 period, annual wages lost in the declining sectors totals $182 billion. This is $26 billion greater than the annual wages we project will be earned in the advancing sectors. To be sure, the economy as a whole will experience wage gains of $269 billion in the 2004 expansion.

The manufacturing sector has been the hardest hit in terms of lost jobs and wages. Indeed, many of these jobs are not expected to return during the recovery. The nondurables sector is expected to continue to lose jobs throughout the forecast period while expected job gains in durables manufacturing will be minimal. Durables manufacturing lost 1,675,000 jobs from the first quarter of 2001 to the second quarter of 2003. These jobs, which pay an average of $45,300 annually will continue to decline year-over-year until early 2005 when auto plants such as Toyota’s truck manufacturing plant in San Antonio, TX are expected to begin production.

A trend in auto production that continues with Toyota’s new Texas plant is the shift in location from the traditional Great Lakes region (Detroit, MI, Ann Arbor, MI) to new plants in the South (San Antonio, Jackson, MS), moving closer to potential consumers. Boeing, which is planning a new jet, the 7E7, to compete with the best Airbus has to offer, is considering sites in Brownsville, TX, Charleston, SC, Kinston, NC, and Savannah, GA in addition to Seattle, WA and Wichita, KS, where the company already has a stronghold.

In the case of nondurables manufacturing, production plants are moving to Mexico and Asia to take advantage of inexpensive labor. In the U.S., non-durables jobs pay an average of $40,560 annually. The sector lost nearly 732,000 jobs from the beginning of 2001 to mid-2003. Apparel, Textiles and Food production have been hardest hit by the job losses. In the past two years, Levi Strauss, which operated plants in El Paso and San Antonio Texas, closed all manufacturing facilities in the U.S., opting to purchase products through independent contractors based overseas. Fertilizer and chemicals producers, primarily based along the Gulf Coast, have been forced to shutter operations due to the high cost of natural gas.

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