This morning, we looked at some pretty glaring omissions in President Obama’s article for The Economist magazine on the state of the U.S. and world economies and their outlooks. But there’s one more that deserves mention, and it should be familiar to RealityChek regulars: his claim that during his watch, the American private sector has created 15 million net new jobs.
As I’ve been writing for years, many of those jobs don’t deserve the label “private sector” at all, because their strength (and therefore much of their ability to hire) depends heavily on government spending, not mainly on the market forces that we’re told are the best guarantors of sustainable prosperity. So I’ve been calling these jobs – which are found mainly in the healthcare industry – “subsidized private sector” jobs. Last Friday’s September U.S. jobs report conveniently enables an update of how big a role they’ve played in the nation’s employment recovery.
A single month’s data is almost never definitive, but the new figures provide a good introduction to the subject. According to the Labor Department, in September, the total American non-farm sector (Labor’s U.S. employment universe) saw its net payrolls rise by 156,000, and private sector jobs conventionally defined increased even more strongly – by 167,000. (The public sector lost 11,000 workers on net.)
If the private sector is defined more realistically, however, and the government-subsidized jobs are stripped out, its employment gains were only 138,000 – because those subsidized industries boosted employment by 29,000.
Although this difference looks pretty big, the subsidized sector actually played a fairly modest role that month in the hiring picture by recent standards. During the first nine months of this year, the subsidized private sector generated 26.36 percent of total 1.601 million net new non-farm jobs created in America, and 28.90 percent of the 1.460 million conventionally defined private sector jobs.
Breaking a recent pattern, the subsidized private sector’s share of total U.S. jobs created from January through September of last year was actually a little higher (26.96 percent). So was the subsidized industries’ share of conventionally defined private sector jobs (28.30 percent). But these figures were both much higher than they were in 2014 – when the subsidized private sector produced 17.03 percent of new total non-farm jobs during its first nine months, and 17.46 percent of employment increase in the conventionally defined private sector. And the numbers were even lower in 2013: 15.03 percent and 14.58 percent.
Another way to look at the subsidized private sector’s burgeoning role is to examine its share of employment on a standstill basis at various key points in recent economic history. Here’s the picture in December, 2007, when the Great Recession began:
Conventional private sector share of total non-farm jobs: 83.83%
Subsidized private sector share of total non-farm jobs: 13.63%
Subsidized private sector share of conventional private sector jobs: 16.26%
“Real” private sector share of total non-farms jobs: 70.19%
Here’s where matters stood in June, 2009, when the current recovery began:
Conventional private sector share of total non-farm jobs: 82.77%
Subsidized private sector share of total non-farm jobs: 14.97%
Subsidized private sector share of conventional private sector jobs: 18.09%
“Real” private sector share of total non-farms jobs: 67.88%
And here’s the situation as of last month:
Conventional private sector share of total non-farm jobs: 84.68%
Subsidized private sector share of total non-farm jobs: 15.75%
Subsidized private sector share of conventional private sector jobs: 18.60%
“Real” private sector share of total non-farms jobs: 69.05%
To me, the big takeaways are that (a) the real private sector share of total non-farm employment is still lower than it was when the recession broke out; (b) the subsidized private sector’s share is nearly five percentage points higher; and (c), the subsidized private sector’s share of the conventional private sector has continued to grow even as the latter’s share of the economy-wide total has expanded because government hiring is still depressed.
Again, Mr. Obama seems to view his major economic legacy as “a more durable, growing economy.” The outsized growth of the government subsidized private sector indicates that his successor might come to feel differently.