Last Friday, President Obama’s cheerleaders hailed that day’s December U.S. jobs report as proof positive that the outgoing administration has been a roaring success on the employment front. Central to their argument, according to Mr. Obama’s economic advisers themselves, has been the administration’s record in fostering private sector job gains.
In other words, the Obama camp has just given us the latest reminder that the way the government gathers and analyzes statistics can conceal at least as much as it reveals about economic trends. The main problem when it comes to such private sector jobs? As I’ve repeatedly noted, the Bureau of Labor Statistics’ definition of that portion of the economy includes enormous sectors – notably healthcare services – where levels of demand (and therefore employment) depend heavily on massive government subsidies.
And the December numbers – which provide the first take on Mr. Obama’s complete jobs performance (several revisions will be made in the months to come) – once again reveal that employment gains in what I call the “real private sector,” have been much less impressive. And that’s important because the real private sector is where the results depend largely on market forces. Therefore, they’re much better indicators of the American economy’s health than developments in industries strongly influenced by politicians’ decisions.
The December monthly figures were stellar for the subsidized private sector. It generated 70,000 of the 156,000 net new jobs (nearly 45 percent) created that month, and nearly half of the 144,000 employment improvement in the private sector as it’s conventionally defined.
These figures were unusually high. But they continue a trend that becomes clearer when looking further back into the current recovery (which pretty much coincides with President Obama’s term in office).
For 2016, as a whole, the subsidized private sector was responsible for 592,000 of the 2.157 million jobs added on a net basis – or 27.45 percent. The real private sector, meanwhile, contributed just over 64 percent of the new employment. (Government took care of the balance.)
Three years ago, the comparable numbers were 14.92 percent of total new non-farm jobs on net for the subsidized private sector and 87.23 percent of such employment for the conventionally defined private sector.
In other words, the subsidized private sector’s share of new American job creation nearly doubled, while the real private sector’s share fell by more than 26.55 percent.
From another perspective, over the last three years, the subsidized private sector’s share of the conventionally defined private sector has more than doubled – from 14.60 percent to a shade under 30 percent.
Incidentally, it’s critical to keep in mind that, if anything, these data greatly understate the importance and growth of the subsidized private sector. For they count only those subsidized private sector jobs that can be easily identified in the official monthly job reports. Digging deeper into these data would reveal many more such positions – for example, in medical-related manufacturing. And another large group of subsidized private sector workers is much more difficult to quantify – those engaged in defense-related manufacturing and service provision.
Finally, don’t mistake this effort to distinguish the subsidized from the real private sector as an effort to brand the former as “bad” by definition and the latter as similarly “good.” Any number of subsidized private sector jobs perform worthy and often vital work. Moreover, even most conservatives haven’t yet figured out a viable way to eliminate government from healthcare.
And when it comes to healthcare, don’t forget that its strong employment growth, and indeed dominance of subsidized private sector payrolls in part reflects the aging of the American population and its consequently greater medical needs.
Instead, view this analysis as an exercise in greater precision and recognizing change. Good luck running an economy successfully without them.