The March employment report showed modest job gains of 192,000 with the unemployment rate unchanged at 6.7 percent. Unemployment remains highest among teenagers (20.9 percent) and African Americans (12.4 percent).
The sectors with strongest growth were food services and drinking places (+30,000) and temporary help services (+29,000). With additions in these lower-wage sectors, the average wage ticked down a penny, giving back part of last month’s strong 9-cent gain. The best news in the report was that the labor force participation rate ticked up 0.2 percent, the employment rate rose slightly, and the average workweek recovered from a winter decline.
The weak state of the labor market and the dearth of startup employment contrasts sharply with several years of high business profits. The story has changed little since 2012, when I explained how profits could recover so handsomely without convincing many new businesses to form nor leading to a decent increase in employment.
But since the recession, Washington’s policies have increased the barriers to entry, making it more expensive and legally onerous to start up a business. Large established firms have the lawyers and lobbyists to protect themselves, but startups are discouraged from competing with the incumbents. The result is higher profits and lower employment.
Instead of moving to reduce the costs and burdens imposed on potential employers and employees by legislation like Dodd-Frank and Obamacare, the administration has dictated that the beatings will continue until morale improves. In an obviously weak labor market, President Obama is asking Congress to increase the minimum wage to its highest inflation-adjusted level ever. It does not take a great deal of economic acumen to understand how a mandatory increase in the entry-level wage discourages firms from hiring teenagers, the long-term unemployed, and those with the least education and experience.