Yesterday, RealityChek reported on how the U.S. economy’s subsidized private sector has been dominating total job creation during the current economic recovery. Today, we’ll document another way in which these industries – which are heavily dependent on government subsidies – are playing a similar role when it comes to job openings. That measure of the labor market is especially important, since it’s a part of one of Fed Chairman Janet Yellen’s favorite measure of the health of American employment – the so-called JOLTS report that tracks job openings, layoffs, and turnover.
The JOLTS data for October came out yesterday, and show that total non-farm job openings in the United States two months ago (the American employment universe according to Labor Department statisticians) totaled 5.383 million. That still-preliminary figure is the third highest for the economic recovery, which began in June, 2009.
According to the JOLTS report, the private sector accounted for 90.79 percent of those openings, which seems to indicate that the vast majority of American job-creation for the foreseeable future will be coming in that part of the economy that typically generates most of its productivity growth and innovation, since its performance is largely determined by free market forces.
But as we keep noting, much of America’s so-called private sector is comprised of industries, like health-care services, where levels of consumption, output, and therefore hiring depend heavily on government spending. In October, the JOLTS report revealed that this subsidized portion of the private sector accounted for 19.86 percent of job openings. Consequently, the “real” private sector share was only 70.93 percent.
The difference in just one year has been eye-opening. In October, 2014, the subsidized private sector was responsible for only 17.61 percent of total job openings, and the real private sector generated 73.95 percent.
Last October and this past October, the real private sector performed much better in this regard than at the beginning of the recovery. Then, it accounted for only 64.74 percent of all job openings, and the share of the subsidized private sector was way up at 21.98 percent. Back then, though, the private economy was still wheezing (employment is usually a lagging economic indicator), and health-care services were holding up the entire U.S. labor market.
A better comparison might be with December, 2007 – when the last recession technically began. The economy was already suffering from the bursting of the housing bubble, and consequent Wall Street turmoil. But the real private sector still produced 72.08 percent of all U.S. job openings, and the subsidized private sector share was 17.74 percent.
In other words, government subsidies are responsible for a higher percentage of the American economy’s new employment opportunities today than at the end of the last economic expansion – even though today’s recovery is more than six years old. Moreover, the October-to-October comparisons show that the trend is moving in exactly opposite of the desired direction, in which the real private sector would be increasingly important in the country’s employment picture.
As I’ve repeatedly stated, the subsidized private sector is an essential part of the economy – and it’s hard to imagine how the government could completely or even substantially exit areas like health-care services for the foreseeable future even if the American people wanted this result. (And there’s no indication that they do.) But the subsidized private sector’s historically large, outsized role in not only job-creation but job-opportunity creation seems more like a sign that the U.S. labor market remains badly damaged from the financial crisis and ensuing recession, not that it’s nearly recovered.