Are We Living in a Ghost Job Market?

President-elect Donald Trump is about to inherit one of the strongest economies an incoming commander-in-chief has been served up in years.

Unemployment is low. Job growth is steady. Wages are rising. All told, national economic indicators generally are pointing to sunny skies, despite Trump's campaign-trail insistence that dark clouds are hanging over the country's labor market.

Yet Trump's message on America's economic ills resonated with millions, in part because economic metrics are equal to the sum of their parts. Strong job growth and wage gains in major city centers, for example, have been offset by dwindling opportunities in rural America.

As a result, public polling leading up to the election suggested Americans couldn't seem to agree on whether things were good or bad. Gallup's periodic economic confidence index showed deeply divided sentiments walking into Election Day, particularly along party lines. Republicans were much more likely to bemoan the trajectory of the U.S. economy, while Democrats more frequently basked in the recovery's apparent glow.

Accordingly, Democratic candidate Hillary Clinton and her supporters – including President Barack Obama – highlighted the nearly 15 million new jobs that employers have drummed up since the labor market turned a corner more than six years ago. In his final press conference of the year last week, Obama opened by laying out his economic legacy and how far the country has come under his administration.

However, a recent report from researchers at Princeton and Harvard universities calls the strength of the recovery into question, suggesting that the vast majority of new jobs created over the course of the last decade weren't necessarily stable or traditional positions.

The study's bedrock finding is that the percentage of workers in so-called alternative work arrangements – meaning those employed as temporary help agency workers, on-call workers, contract company workers, and independent contractors or freelancers – rose from 10.7 percent in 2005 to 15.8 percent at the end of 2015. Many types of jobs in the burgeoning gig economy – such as those tied to companies like Uber or TaskRabbit – would fall under this classification.

That jump carries with it what the authors of the report called a "striking implication": that 94 percent of the net employment growth seen between 2005 and 2015 seems to have occurred within those alternative work arrangements.

And the implications of that assessment are complicated, raising important questions about worker pay, job security and whether these types of positions will be sticking around long-term.

The report indicates job growth over the past decade was dominated by impermanent positions that typically pay "considerably less per week" than similar jobs held by traditional employees. New opportunities appear to have consisted almost entirely of unusual working situations, which effectively ended up replacing at least some standard jobs.

"Unfortunately, we cannot determine the extent to which the replacement of traditional jobs with alternative work arrangements occurred before, during or after the Great Recession, although it is likely that there were tremendous losses of traditional jobs during the recession," the authors said. "[I]t is plausible that the dislocation caused by the Great Recession in 2007-2009 may have caused many workers to seek alternative work arrangements when traditional employment was not available."

Contract workers clocked in as the fastest-growing segment of all non-traditional employment profiled in the study, gaining from 1.4 percent of those employed in 2005 to 3.1 percent in 2015. The report did note, however, that only 0.5 percent of all employees in 2015 worked "through an online intermediary, such as Uber or TaskRabbit."

"Thus, the online gig workforce is relatively small compared to other forms of alternative work arrangements, although it is growing very rapidly," the study said.

The study's authors – Lawrence Katz, an economics professor at Harvard who served as the chief economist at the Department of Labor in the 1990s, and Alan Krueger, a Princeton professor and former chairman of the White House Council of Economic Advisers under Obama – observed little change in alternative arrangements between 1995 and 2005, suggesting the acceleration seen in recent years is not necessarily part of a broader, decadeslong trend.

But while many contract workers enjoy the perks of having more flexible schedules when compared with traditional 9-to-5 employees, Katz and Krueger found that "a larger share of alternative workers are involuntary part-time workers compared with employees in traditional jobs," meaning these employees aren't exactly happy about their arrangements and are unable to lock down standard full-time options.

Such atypical employees were also found to work fewer hours per week, inherently limiting their pay.

"When you look under these unemployment stats and look at people driving Uber and doing jobs on Thumbtack and all this really cool stuff happening in the economy, people aren't doing that because it's cool. They're trying to make ends meet," says Fred Goff, CEO of employment networking outfit Jobcase. "It's a massively fragile, shallow economy, and it's not being captured by the top-line stats."

Goff says this disconnect between what official job numbers say and what workers experience in their day-to-day lives helps explain why Trump's message resonated with so many Americans – and why analysts and experts looking at unemployment data didn't see his victory coming.

Government-backed data pools have a notoriously difficult time estimating the size and scope of the gig economy and its atypical employees who don't show up on a standard company's payrolls. So labor market shifts like this wouldn't be easily identifiable looking at standard employment and wage metrics.

"If you have real [gross domestic product] growth and real unemployment under 5 percent, people vote for establishment candidates. They'd vote for Hillary. This would have been a cakewalk for her," Goff says. "What we see [instead] is that even people who are employed have this anxiety about their work life and this anxiety about how they can provide for their families. And when you have that, that to me is the dominant story."

How the economy evolves from here is difficult to say. Krueger and Katz raise the possibility that the shift to alternative employment could have been done out of necessity in the aftermath of the Great Recession, causing workers to take up these roles because they simply had no other options.

Viewed in that light, they said "one might expect a return to a lower percentage of workers employed in alternative work arrangements over time, as the effects of the recession continue to fade."

And yet the economy is seven years out from the recession, and Krueger and Katz still found considerable instances of alternative employment. The report suggests these less-than-normal working conditions could become the new normal should recent trends continue.