BUT ARE THEY GOOD JOBS?

I have written on several occasions that I love to read, and I also try to find economic research wherever it is available. My friend, Leo, is part owner of a company that sells large scale, refurbished industrial electrical components and I am constantly asking him about the condition of his order book. I got my haircut last night and I asked my barber if foot traffic is still strong. In the last several months, there have been numerous anecdotal reports about slowing demand for technology workers. Tech positions are largely good paying jobs and any slowdown in highly paid segments of the economy could have a negative impact on consumer spending and ultimately hurt the economy.

This morning, I read a piece on Bloomberg discussing that New York City has been touting their recent growth in jobs. But are they good jobs? According to a Bloomberg article published on June 5th titled, “NYC’s Job Boom is Fueled by Taxpayer-Funded $38,200 Health Gigs,” by Laura Nahmias, “virtually all of the jobs added in the 12 months ended in March were in home health care, a low-paying but rapidly swelling field. It is technically classified as private employment, but home health care is actually paid for primarily through publicly funded health programs like Medicaid, where soaring costs are a looming threat to the New York state budget.

If not for the gains in home health care — where average annual wages statewide are $38,280 — the city’s total private-sector jobs would have contracted over the past year, city financial documents published in April show. 

Excluding the “education and health” sector, where the growth was in health care, New York City lost 14,100 private-sector jobs in the year through March, according to city budget documents. The declines have been particularly acute in manufacturing, construction, and professional and business services, which typically pay significantly higher wages.”₁

My point is not to disparage health workers or New York City’s economic situation, but rather to remind mostly myself that there needs to be a careful analysis of the job data that is announced over the next several months. If inflation is falling due to the Fed’s monetary policy, the question becomes if we slip into a recession or if we can see rates brought down before there is some economic calamity.

In an expensive area such as New York, $40,000 jobs do not provide the discretionary income necessary to propel economic growth. Our national economy is about 70% driven by consumer spending. If job growth is in the lower paid segments of the economy, there will be less discretionary spending, and this will contribute to economic slowing. Ultimately, if job growth is not in higher paying economic sectors and consumer spending declines, inflation will likely decline as well, and we will see interest rates fall. This series of actions could contribute to accelerating expenditures and the next leg up in the economy.

The key is to look beneath the hood to evaluate the jobs created, not simply the total headline number. More to come!