California jobs numbers show middle-income doughnut

150 150 John Guenther

Related video: Profile of the iHub manufacturing initiative

While everyone is up on the news Dunkin’ Donuts is coming back to California in a big way and that the cronut is a trend, it also seems there’s an unfortunate doughnut appearing in the state’s job market and middle-income Californians are in the hole.

This is the time of the month when columnists write about how the California economy is a mixed bag. And the jobs numbers that were bandied about this week showed California is still a bright spot nationally but another report by the California Budget Project (CBP) argues the state’s recovery is disturbingly uneven. The good news is it’s not too late to reach for the California economy that’s good for us, with good-paying, in-demand jobs, instead of the unhealthy doughnut of low-paying, part-time jobs.

The national jobs numbers that dropped today show 169,000 jobs were added in August, which is lower than the expected 180,000. The unemployment rate dropped to 7.3 percent, but a lot of that drop is because of 300,000 people dropping out from the labor market. Because of that, the participation rate hit a very low 63.2 percent.

On the other end of the week (and on the good news side of things), the California Employment Development Department proudly said on Monday in its annual Labor Day report (PDF) that California employers have added jobs for 25 straight months and that equals more than 800,000 jobs since the bottom of the job market in 2010.

But right after that report came another one from the CBP, which analyzed US Census Bureau data and said “more than two out of five unemployed Californians have been looking for a job for at least half a year.” On top of that, the report authors revealed 1.3 million workers were holding involuntary part-time jobs, meaning they can’t obtain full-time hours.

Another troubling area is the decline in quality and quantity of middle-income jobs. The report added that mid-wage jobs fell by 10.7 percent between 2006 and 2010 and kept falling between 2010 and 2012 (-1.6 percent) at a time when they should have been recovering.

One of those sectors with many mid-income jobs in California is the manufacturing sector. Nationally, August’s manufacturing numbers showed growth with 14,000 jobs added. But that’s not a promising pace for the sector.

“The underlying story here is that manufacturing employment continues to growing at a disappointing pace. The sector lost workers for five straight months from March to July, with 39,000 fewer employees during that time,” Chad Moutray, chief economist for the National Association of Manufacturers, said in the blog. “Over the course of the past 12 months, the sector has added just 20,000 additional workers, or less than 1 percent of the 2.2 million nonfarm payroll workers hired during that time.”

It’s not just the total number of mid-wage jobs that are on the decline. Middle-income workers–as well as low-wage workers–saw a big drop in earnings through the recession. The CBP report showed the wage of workers in the middle of the income distribution have a purchasing power that is 3.8 percent below what it was before the recession.

Only the high-wage workers saw their earnings go back up, close to pre-recession level from 2006. At the same time, low-wage and high-wage jobs saw smaller losses compared to the middle, in terms of total number of jobs lost during the recession.

Looking at these numbers, it’s not just about the sheer unemployment. The state should pay attention to this doughnut effect where the middle-income job has lost ground. People in all regions of the state need those middle rungs of the economic ladder, if we want to see long-term recovery and growth.

That’s where policies and partnerships designed to boost middle-class jobs come in handy and the California Economic Summit has taken up that charge. Think of them as the kale of economic development. It’s the economy that’s good for us. Those part-time jobs can keep people going for the short-term but they’re not nutritious for the California economy in the long run.

One such effort is the Summit’s Advancing Manufacturing Action Team which will work with industry–especially small and medium-sized manufacturers–universities and community colleges, economic development and training organizations, and state government to develop strategies to boost manufacturing and exports. The statewide iHub network represents one such public-private partnership for innovation, profiled by California Forward.  

And focusing on support of manufacturing is something of a no-brainer for bolstering the middle class as manufacturing jobs can make an average of 39 percent more (PDF) than the overall California average wage. And the comeback of those kinds of jobs in California will be much sweeter than the return of a prodigal doughnut chain.


John Guenther

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