Economy adds 280K jobs in May, but the definition of 'job' is changing

We’ve become used to fat monthly jobs numbers in 2015. But May was impressive even by our now-lofty expectations, and other closely watched areas of the monthly employment report offered cause for optimism as well.

The US economy added 280,000 jobs last month, according to a report released Friday by the Labor Department. That’s nearly 60,000 jobs more that the 221,000 added in April and far beyond the 225,000 economists were expecting.

The unemployment rate ticked up slightly at 5.5 percent, but that increase is yet another hopeful sign because it is “due to more people coming on to the job market looking for work,” says Markit economist Chris Williamson, via e-mail. “Importantly, from a policy perspective, people are encouraged to start looking for work and the jobless rate remains close to the 5.0-5.2% range which is widely seen as indicative of full employment.

The average workweek for US employees stayed at 34.5 hours, but average hourly earnings rose slightly – 8 cents, to $24.96. Overall, wages have risen 2.3 percent over the past year –  they’re not quite accelerating at a breakneck pace, but still faster than in the past several years.

”With the labor market tightening, though, we expect wage gains to continue on an erratic, gentle uptrend in the quarters ahead,” MFR Inc. economist Joshua Shapiro writes in an e-mailed analysis.

More jobs, fewer employees?

Friday’s report, though undeniably encouraging, comes as the US employment picture shifts to a form that is becoming harder and harder for economists to track. The idea of employment, and what constitutes a traditional employer/employee relationship, is becoming more muddled. In a report released last week, the Census Bureau found that the US has added 4 million so-called “nonemployer” businesses (businesses without other paid employees) over the past decade.

“Nonemployer businesses run the gamut from old-fashioned family-run corner stores to home-based bloggers,” said William Bostic Jr., the Census Bureau’s associate director for economic programs, in the report’s release. “In some cases, the business may be the owner’s primary source of income, such as with real estate agents and physicians, but in other instances, they may operate the business as a side job, such as with babysitting and tutoring.”

Their rise, experts say indicates two things. For one, due to the rising costs of providing benefits like health care and retirement plans, “it’s getting more costly to hire a regular employee than to contract out,” says Diane Lim, an economist with the Committee for Economic Development, a moderate think tank based in Arlington, Va. Businesses, are “finding that for a lot of the work that needs to be done, it is more cost-effective to hire part-time employees,” she says, leading them to contract out a wide range of services, from plumbing to payroll management.

Second, self-employment for, say, a freelance plumber has become easier as the US has shifted more to a service-based economy from a goods-based one – i.e, the startup costs for a blog or a consulting businesses are far lower than a factory or a dry goods store, and it’s easier for such contract workers to quit a business that isn’t making money and start up another one. This has an upside at the macro level, Ms. Lim argues, because it means workers can easily shift to the most high-demand sectors of the economy. Depending on where the jobs are, someone can “be a cab driver one day and be delivering groceries the next,” she says.

Third, the rise of such work falls in line with the career priorities of younger workers. Several surveys, including a recent one from global services firm EY, have found that flexibility is a top priority for Millennial workers, even more so than higher pay for many. They also value creativity in their work more than previous generations, according to a 2014 report from the While House’s Council of Economic Advisers (CEA). That combination makes self-employment and freelance work attractive options, and has led to the rise of a number of companies catering to the demand for flexible income streams, including ride-sharing service Uber and Avon-like businesses that let people sell things out of their homes for a commission, like the nail-decal company Jamberry and clothing retailer Stella & Dot. 

There are obvious drawbacks, however. A consistent income is harder to come by, and self-employment comes without the built-in benefits of a regular 9 to 5 job, like health insurance and automatic retirement savings. It's also led to some problematic gray areas in terms of employer accountability – there's been much debate, for example, over how much Uber is liable for its drivers when they get in accidents or commit crimes. Still, Lim says, that growing flexibility in our definition of “work,” with all of its odd jobs and side-income streams, may mean that worried-over measures like historically low labor force participation, may not be quite so dire. “It’s getting harder and harder for our official statistics to quantify it,” she says.