November 2, 2012 / 5:19 PM / 8 years ago

"Wage scar" threatens U.S. labor recovery: Manpower CEO

NEW YORK (Reuters) - A “wage scar” caused by workers accepting lower pay could slow the pace of U.S. economic recovery for years to come, the chief executive of global staffing services company ManpowerGroup said on Fri day.

A job seeker fills out forms at a table while attending a career fair with prospective employers in New York City, October 24, 2012. REUTERS/Mike Segar

Workers are accepting lower pay because a U.S. labor recovery, while encouraging, remains muted.

“You get this kind of wage scar that occurs,” Jeff Joerres said in an interview following a stronger-than-expected October jobs report that also showed a dip in average hourly wages.

“You make a compromise and you’re now making $25,000 and you used to make $30,000,” Joerres said. “That kind of follows you ... throughout your career. So by the time you’re 50 years old, when you normally would’ve been making $60,000, you’re now making $52,000.

“Those things are going to happen. We’re going to see lower disposable income and a more tepid economy for a long time.”

The U.S. economy added 171,000 jobs outside the farm sector last month. That was more than economists forecast, but the unemployment rate ticked up to 7.9 percent.

At that pace of payrolls growth, it would take more than two years for the labor market to reach pre-recession levels.


Friday’s jobs report showed 13,600 temporary help jobs added in October. Those jobs, which rose at a slightly faster pace sequentially than is typical, are considered a leading indicator of broader labor activity because employers add or cut temporary workers before hiring or firing permanent staff.

The percentage of temps in the labor force rose to 1.9 percent but remains below its year 2000 record above 2 percent.

Temp jobs usually rise as companies ramp up in October ahead of the holiday shopping season. Although the move was encouraging, Joerres said, the jobs recovery remains fragile and a prolonged period of flattish growth is much more likely than a fast, ‘V-shaped’ recovery.

“It’s a hand-over-hand crawl out of where we were. If anybody wants to see a number like 250,000 to 300,000, which would not be unusual if we start really motoring, we have a ways to go before that,” he said. “When we talk to clients, the more conversations recently are about holding back as opposed to moving forward, and part of that is just a wall of uncertainty.”

Some uncertainty will lift once it is clear who wins Tuesday’s election, but attention will immediately turn to the so-called “fiscal cliff” of budget cuts and tax hikes that could begin in the new year.

“What we need to get on very quickly is the fiscal cliff. Regardless of who wins, what are you gonna do with that?” Joerres said. “That’s the one that really starts to affect the economy.”

Employers have cash but are waiting to see a clearer direction for the economy before they commit to spending it. Besides the U.S. fiscal situation and the possibility that President Barack Obama’s healthcare reforms could be reversed if he fails to win re-election, corporate chiefs worry about the European debt crisis, China’s economy and recent tensions between Japan and China over disputed islands.

“The interconnected world is creating variables that we just can’t understand,” Joerres said. (Reporting by Nick Zieminski in New York; Editing by Dan Grebler)

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