The new normal, polarized labor market

Forecasting the end of routine jobs as we know them

Not to rain on the parade of December job numbers — 292,00 new hires, official unemployment rate 5% — but longer-term trends are not rosy, especially for those caught in the middle of what’s called “job polarization.”

That is, according to the Federal Reserve Bank of St. Louis:

  • The decline of middle-skill occupations, such as manufacturing and production occupations.
  • The growth in both high- and low-skill occupations, such as managers and professional occupations on one end, and assisting or caring for others on the other.

The chief underlying forces — you guessed it — are automation and offshoring, both of which are, “lower(ing) the demand for middle-skill occupations relative to the rest.” The bank’s analysis breaks down the job market into four classifications: “routine” v. “non routine”, and “manual” v. “cognitive.” The employment trend line, as it has done over a 30-year period, favors if not in terms of income, the “non-routine cognitive” (managers, professionals) and “non-routine manual” (health and human service workers) — at the expense of “routine cognitive” (office, sales) and “routine manual” (transportation, production).

In graphic form:

Coincidentally, in its December employment report the Bureau of Labor Statisticsnotes, “Employment gains were led by professional and business services, construction, health care, and food services and drinking places. Mining employment continued to decline.”

In its report, the St. Louis Reserve concludes: “Understanding the impact of polarization on the labor market is important and remains an active topic of economic research.”

Not to mention one of the most serious public policy issues that needs addressing.