Since the next U.S. jobs report (covering August) won’t be out until a week from Friday, it seems like a good idea to take stock of where the economy stands in terms of the employment being created during this weak recovery by industries that depend heavily on government subsidies for their levels of activity – and therefore hiring. (Think, in particular, “healthcare services.”) Distinguishing these jobs from those in what I call the “real private sector” matters because America’s best bet for lasting prosperity is an economy where the lead roles are played by sectors whose vibrancy is determined mainly by market forces, not government decisions.
The message being sent by the last jobs report (which covered July) and revisions for June and May mixes good news with bad news. The good: After surging through the spring, the relative growth of subsidized private sector jobs seems to be leveling off. The bad: On a January-July basis, these jobs are still a more important part of the national hiring picture than during the first seven months of last year, and their prominence remains way up over the last four years.
July’s numbers are still preliminary (as are June’s). But they show that the subsidized private sector accounted for 15.73 percent of total non-farm jobs (the Labor Department’s employment universe) and 18.58 percent of the jobs classified as private sector. The former figure was unchanged over the June level (which itself was unrevised) after a long period of steady increases. The latter was also unchanged from June, but that June figure was revised down from 18.59 percent – which also happened to be the May number.
Similarly, the subsidized private sector accounted for only 14.90 percent of July’s total monthly job gains. That’s down from 19.86 percent in June and completely different from the situation during the (apparently anomalous) month of May,. That’s when the entire non-farm economy only created 24,000 net new jobs and the subsidized private sector increased payrolls by 46,000
Of course, these shifts aren’t big (except for those involving seeming outlier May). But even small changes in direction following years of unmistakable movement one way or another can signal bigger changes down the road. So stay tuned.
As indicated, though, over the longer term, the subsidized private sector is still pacing the nation in relative employment gains by a wide margin. During the first seven months of this year, these industries were responsible for 25.96 percent of the net new jobs created by the entire economy, and 28.99 percent of the jobs conventionally defined as private sector. Those numbers are up from 24.72 percent and 25.87 percent, respectively, in 2015, and all the way up from 15.10 percent and 14.26 percent in 2013.
Viewed from another perspective, four years ago, the real private sector – the part of the economy we want to absolutely dominate hiring – generated nearly 91 percent of the total economy’s net job increase during the first seven months of the year. Since then, that share during comparable seven-month stretches has declined to 81.55 percent, 70.82 percent, and only 63.59 percent so far this year.
And even though the stand-still numbers cited above have been improving month-on-month so far this year, the subsidized private sector’s hiring employment is still much higher nowadays than at the start of the (Great) recession. In December, 2007, it stood at just 13.63 percent of all non-farm jobs and 16.26 percent of conventionally defined private sector jobs.
When the recovery began, in June, 2009, these numbers were 14.97 percent and 18.09 percent, respectively – because the private sector without subsidies was had taken such a huge jobs hit during the recession. To remind, the latest (July) figures are 15.73 percent and 18.58 percent.
Netscape founder Marc Andreessen captured a major technology, business, and economic trend a few years ago when he said that “software is eating the world.” It’s an exaggeration to say that the subsidized private sector is eating the American jobs market. But “munching on it” may not be so far off the mark.