Measured by creation of good jobs, today’s recovery stands alone

Three times since the year 2000 — during the spring of 2005, in July 2015, and most recently through the late summer of this year — America’s official unemployment rate hit 5.2 percent. But while boasting the same “UR,” those three moments were defined by drastically different labor economies. Economic recoveries should be judged not simply by how many jobs come online, but by whether the jobs created pay a reliably middle-class wage. Unfortunately, the unemployment rate counts all jobs alike, no matter whether they pay a king’s ransom or leave families dependent on government support. Absent an indicator that incorporates that distinction, it’s nearly impossible to compare one recovery to another.

Imagine for a moment that we could reclassify those subsisting on poverty jobs and part-time gigs as “unemployed.” You’d suddenly be able to gauge more precisely when the economy was producing good jobs, and when the unemployment rate was masking a troubled economy because workers were too often accepting jobs that left them mired in part-time work or below the poverty line. Here’s some welcome news: Researchers at the Ludwig Institute for Shared Economic Prosperity have done exactly that, producing an alternative indicator, the True Rate of Unemployment (TRU). And in what is perhaps a bit of surprising news, when it comes to generating good jobs, the post-pandemic economy thus far stands alone as a success.

Consider the statistics. During President Trump’s first year in office, the unemployment rate, which again, counts all jobs the same, fell from 4.7 percent to 4.1 percent — a year-over-year drop of nearly 13 percent — nothing to sneeze at. But the TRU, which measures good jobs, fell only from 26.2 percent to 25.4 percent — a mere 3 percent drop year-over-year, suggesting that a disproportionate share of the new jobs created during the Trump recovery were of the sort failing to boost families into the middle class.

Compare that to the first eight months of the Biden administration. The unemployment rate dropped from 6.3 percent to 5.2 percent, significantly more than during the entirety of Trump’s first full year in office. But that’s less important than what happened to the measure of good jobs: Since Biden’s inauguration, the TRU has fallen from 24.7 to 22.8 percent, tumbling roughly two-and-a-half times faster than during Trump’s first year, and suggesting moreover that a much more significant share of the new jobs is full-time and pay a decent wage. Put more simply, as jobs have come online since President Biden took office, a much more substantial percentage have been good jobs.

This crucial wrinkle has several important implications. First, it sheds new light on the consternation prospective employers have expressed about their recent inability to fill job openings. Is it any wonder that workers are not rushing to fill poorly compensated job opportunities when so many others are finding better-paying alternatives? For all the worry that enhanced government unemployment benefits incentivized workers to stay home, there has been too little focus on the possibility that workers who might once have flipped burgers for a pittance or driven Ubers for poverty wages are now more comfortably situated in jobs boasting a higher wage.

Second, it suggests that proponents of raising the federal minimum wage, thwarted by the Senate parliamentarian earlier this year, are well on their way to having the last laugh. As more good jobs are filled by those who once accepted poverty wages, the market is self-correcting by giving job seekers more leverage in negotiations. Amazon is boosting its starting wages for logistics jobs to $18 an hour, and big businesses ranging from Target to Chipotle, are not far behind. Fewer than a fifth of American workers are subsisting on less than $15 an hour.

Third, concerns about wage inflation need to be considered in the proper context. For decades, amid growing alarm over economic inequality, analysts tended to focus on how CEO salaries dwarfed those of the average worker, a phenomenon that certainly demands attention and correction. But a CEO’s earnings have less immediate relevance for the average American family than their own breadwinner’s salary. If, after years of stagnation, wages go up because good jobs replace miserly gigs, that should be a cause for celebration, not a prompt to hand-wring about inflation.

When the unemployment rate hit 5.2 percent in the summer of 2015, a full 27.6 percent of the American workforce was either out of work, toiling for a poverty wage, or searching for a full-time position. Today, with the unemployment rate at the same place, the latter figure has fallen to 22.8 percent. Say what you will about the work Washington still needs to do, that progress should frame our definition of successful economic policymaking. 

For all the misery and carnage wrought by pandemic, these figures hint at the prospect of brighter days ahead.

The writer, a former U.S. comptroller of the currency, is chair of the Ludwig Institute for Shared Economic Prosperity.