Slowing Economic Recovery Turns Towards Inequality-Driven Normality

In All, Business by Tola Brennan

As the economic recovery settles and stabilizes into a new normal, underlying global troubles and labor polarization contribute to increasing inequality, essentially a crisis in slow motion for working class Americans.

While there are signs that engender optimistic interpretations, small gains conceal a depressing economic reality with no end in sight.

The economy added 160,000 jobs in April according to the monthly survey from the Bureau of Labor Statistics. This falls short of expectations and is coupled with downwards revisions for both February and March. Unemployment held steady at 5 percent but has shown little movement since August of last year.

“The fundamental problems of job loss and stagnation in the middle class are still there and you have a very mediocre gain in wages,” said Rexford Simpson, a professor at Penn State School of Labor and Employment Relations. “We’re moving forwards but at a snail’s pace.”

Part of that sluggishness comes from global stagnation. China has been flirting with a major slowdown and European countries like Greece are seeing tough times. In an interconnected world, troubles abroad eventually radiate everywhere.

“Our exports are suffering a negative demand with major trading partners facing their own dilemmas and an emerging economy that’s stagnating,” said Patrick O’Keefe, director of economic research at CohnReznick. And that means more pressure on consumer spending to drive the economy.

But “we’re not getting a broad-based improvement in earnings,” he said. “It’s all select areas.”

However, there are certainly optimistic voices. “We’re continuing in the right direction,” said Secretary of Labor Tom Perez. “The percentage of unemployed who are long-term unemployed is at its lowest level in seven years.” It’s true that more people have been joining the labor force over the previous months and many economists see a 5 percent unemployment number as full employment, a sign of a healthy and stable economy.

But these gains haven’t been equal.

“We’re continuing to see structural changes where we have polarization of the labor market,” said Tara Sinclair, associate professor of economics at George Washington University. She said we’re seeing good job opportunities at the highest levels of companies, jobs that require college graduate with skills and certifications. Meanwhile, the larger gains in terms of numbers are low-skilled jobs that lack a career trajectory or good pay.

Average wages are $25.53, an increase of 2.5 percent from last April. But with inflation around 1 percent, a chunk of those gains are cancelled out for people on the low end.

“We’re missing the middle,” said Sinclair. “You used to see people come in with few skills and got job training to develop their career and we’re not seeing that as much.”

This gap has meant people who are normally overqualified are having to take jobs that pay less. With limited access to advancement in companies, there’s a greater number of people vying for less lucrative opportunities.

Eileen Merwin, 59, an educator and writer who works in New York but commutes from New Jersey just got a part-time job to makes ends meet.

“It’s a little ridiculous because I have a full time job as an associate professor but like everybody, I’m broke,” said Merwin. “So I took a job at a salary I wouldn’t have normally taken.”

She’s going to be teaching English as a second language for a rate of $10 an hour. “I haven’t had a raise in ten years,” she said. “Without supplemental income, I can’t pay my rent. It’s supplemental to survive.” It’s been a slow squeeze. Five years ago, this would have been a little extra money but now, it’s just barely enough.

With bills going up every year, she’s facing the prospect of working into her old age. “I’m going to  be going to work with a walker” she said.

“This economy isn’t sustainable,” Merwin added. In her view, it’s a really tough time for working class people that doesn’t look to improve anytime soon. And she knows other people in her situation, forced to look for more work. It’s an economy that is “engineered to kill people off,” Merwin said.

But still people are looking. At a temp agency in Chicago, April was a robust month.

“Everything is doing pretty well on our end and it’s really bumped up a bit,” said Alex Pelletier, a recruiting coordinator at City Staffing. She’s noticed an influx of resumes in customer services and marketing. And employers are eager to grab people coming back to work.

“We’re seeing a lot of requests for administration and reception,” Pelletier said. “There are lots of people looking to hire.” And this is certainly a sign of recovery and strength in the economy, but hardly a return of the middle class. “There’s always a huge demand for people in call centers,” she said.

So while few economists see this month’s numbers as a indication of coming contraction, there’s no clear sense of where meaningful future growth might actually emerge. Increases in productivity come from innovations in technology which continue to displace jobs in manufacturing as robots become more advanced, but also desk jobs are replaced by software and advancing algorithms.

The economy might be relatively stable, but it’s a stability with greater inequality and fewer opportunities. Numbers suggest recovery, but that reality looks dramatically different depending on where you look.

It’s a normality that fuels the rise of populist leaders and obfuscates the daily struggles of people like Eileen Merwin.

“I really had to switch my perceptions to be able to do this,” she said.