Even though the unemployment rate dropped in July, many of the new jobs were for low pay.

By Nin-Hai Tseng
August 2, 2013

FORTUNE — July’s report on the state of America’s job market, released Friday, marked the 34th month in a row in which the economy created jobs at a slow and steady clip. This is better news than very few or no jobs created at all, but it’s best to judge by quality vs. quantity.

While the economy generated 162,000 jobs last month, the bulk of those jobs is neither highly paid nor full-time work. This suggests why the economy isn’t growing as fast as the pace of job creation. Here’s a closer look:

Want fries with that?

Industry-wise, retail, as well as restaurants and bars, have accounted for the largest share of the job gains: In July, the retail industry added 47,000 jobs and 352,000 over the past 12 months. Within leisure and hospitality, employment in food services and drinking places rose by 38,000 in July and 381,000 over the year.

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To be sure, there are more low-wage jobs in the economy overall than there are high-wage jobs. Nonetheless, low-wage jobs have made up more of the recent job gains than usual. Retail, restaurant, and bar workers make up about 22% of the overall workforce. But in July, those categories accounted for over 52% of the job growth.

“I don’t think we are becoming an economy of retail and restaurant workers,” says Heidi Shierholz, a labor economist at the Economic Policy Institute. “But what is absolutely true is that low-wage jobs have had disproportionate growth in the economy.”

All this makes for a troubling trend, given that consumer spending drives the U.S. economy: Whereas the average weekly pay of U.S. workers overall is $824, leisure jobs pay $349 a week, while retail pays only slightly more at $520 a week.

Good jobs are much harder to come by these days: Take manufacturing, for instance. We often hear that U.S. manufacturing could turn the U.S. economy around. Manufacturing jobs that pay an average of nearly $1,000 a week added just 6,000 jobs in July. The health care industry used to be the bright spot in an otherwise weak jobs market, but growth in that area is shrinking. So far, health care has added an average of 16,000 jobs a month, compared with an average monthly increase of 27,000 in 2012.

Less work to go around

A not-so-great job is indeed better than no job, but is part-time work any better? The number of people with part-time jobs who want to work full-time totaled 8.2 million in July, up slightly from the month before. And the number of people who landed part-time jobs in July was far larger than those who were hired as full-time workers, 170,000 vs. 90,000.

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Part-time jobs generally offer less job security and few, if any, health and retirement benefits. And when workers aren’t sure how much or where they might work tomorrow or next year, they’re less likely to spend. 

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