Because the latest monthly U.S. jobs figures that were released last Friday incorporated revisions going back to last March, our picture is clearer than ever of how dependent former President Obama’s job-creation record was on employment gains in what I call the economy’s subsidized private sector. Those are industries, notably healthcare service, where levels of demand (and therefore employment) are heavily reliant on government subsidies (and therefore politicians’ decisions) instead of on market forces.*
And unless you believe that government or parts of the economy it largely underwrites should be America’s job-creation leaders – which you shouldn’t – you’ll recognize that the more prominent that subsidized private sector is in the nation’s employment picture, the weaker the job market’s dynamics, and the U.S. economy’s genuine strength.
The verdict? These subsidized industries played a large, growing role in U.S. employment gains achieved during the economic expansion that began in June of Mr. Obama’s first year in office. At the same time, although the economy under Mr. Obama performed much better in this crucial respect than under his predecessor, George W. Bush, it fell short of the job-creation pattern under Mr. Bush’s predecessor, Bill Clinton.
The easiest way to show these trends is to focus on the share of total non-farm employment (the American jobs universe according to the U.S. Department of Labor, which officially tallies these numbers) accounted for by the subsidized private sector on a stand-still basis and the share of total job gains it represents. That methodology also yields the data on how employment in what might be called the “real private sector” is faring. And here are the numbers for the last administration:
Non-farm job change: +14.534m Percentage change: +11.09
Private sector job change: +14.833m Percentage change: +13.68
Subsidized private sector job change: +3.276m Percentage change: +16.70
Real private sector job change +11.557m Percentage change: +13.01
The following numbers show how strongly the subsidized private sector has influenced overall job creation under Mr. Obama:
Share of total non-farm job gains: 22.54 percent
Share of conventionally defined private sector job gains: 22.09 percent
As a result, the real private sector accounted for 80.51 percent of total non-farm job gains – a high but much smaller share than that resulting from failing to strip out the subsidized jobs (102.06 percent – the discrepancy comes from the absolute reduction in government jobs under President Obama).
Moreover, the subsidized private sector’s importance grew impressively during the Obama years. Between 2015 and 2016, it produced 24.44 percent of all non-farm jobs generated and 26.68 percent of all the employment improvement in the private sector as conventionally defined.
Nevertheless, if the subsidized private sector’s employment role grew robustly under President Obama, it positively skyrocketed during the Bush recovery of the 2000s compared with the rest of the economy. Let’s start by examining the job increases in the relevant major sectors of the economy from the end of 2001 to the end of 2007 – an expansion much shorter than that which began under President Obama:
Non-farm job change: +7.139m Percentage change +5.45
Private sector job change: +6.388m Percentage change +5.83
Subsidized private sector job change: +2.827m Percentage change +17.56
Real private sector job change +4.191m Percentage change +4.48
The contrast with the Obama years is even more striking when you specify the percent of jobs created for which the subsidized private sector was responsible. In the most important measures, both numbers are roughly twice as high:
Share of total non-farm job gains: 39.60 percent
Share of conventionally defined private sector job gains: 44.25 percent
As a result, the real private sector accounted for just 58.71 percent of total non-farm job gains under former President Bush – way smaller than the share than that resulting from failing to strip out the subsidized jobs (89.48 percent).
But the data leave little doubt that the best recent job-creation performance of recent presidents was turned in by Bill Clinton – with one caveat. Here are the figures for the economic expansion that began in April, 1991 (several months before his first inauguration) and February, 2001 (a month after he left office).
Non-farm job change: +24.412m Percentage change +22.53
Private sector job change: +21.991m Percentage change +24.47
Subsidized private sector job change: +4.109m Percentage change +35.84
Real private sector job change +17.882m Percentage change +22.80
In terms of the employment-generation role played by the subsidized private sector, here’s what these numbers show for the Clinton expansion:
Share of total non-farm job gains: 16.83 percent
Share of conventionally defined private sector job gains: 18.68 percent
The one blemish in the Clinton record is the very strong relative growth shown by the subsidized private sector both in absolute and percentage terms. Yet these developments didn’t move the overall job change numbers nearly as much as under Presidents Bush and Obama because they started from a considerably smaller base.
Finally, let’s examine how the subsidized and real private sectors’ share of total employment on a static basis has changed since the Clinton expansion began, with the beginning and end of that recovery and subsequent recoveries as our benchmarks:
Subsidized private sector as share of non-farm employment, start of Clinton recovery: 10.58 percent
Real private sector share: 72.36 percent
Subsidized private sector as share of non-farm employment, end of Clinton recovery: 11.73 percent
Real private sector share: 72.53 percent
Subsidized private sector as share of non-farm employment, start of Bush recovery: 12.29%
Real private sector share: 71.41 percent
Subsidized private sector as share of non-farm employment, end of Bush recovery: 13.67%
Real private sector share: 70.16 percent
Subsidized private sector as share of non-farm employment, start of Obama recovery: 14.97 percent
Real private sector share: 67.80 percent
Subsidized private sector as share of non-farm employment, latest Obama data: 15.73
Real private sector share: 68.97 percent
The best way to sum up these trends? In my view, it’s realizing that, since the Clinton recovery began three and one half decades ago, the American economy has generated 37.188 million net new jobs. At that time, the subsidized private sector represented 10.58 percent of total employment. Since then, it’s been responsible for 30.72 percent of the net new jobs created in the nation — punching way above its weight
The real private sector in April, 1991 accounted for 72.36 percent of the country’s total employment. Since then, it’s produced 59.08 percent of net new jobs — punching well below its weight. And finally, fully 52 percent of all the added employment created since April, 1991 that is officially classified as private sector has actually come in the subsidized private sector.
In other words, Presidents come and presidents go, and the economy expands and contracts. But for the last 35 or so years, the subsidized private sector has continued to grow in relative importance. Donald Trump is already considered to be the greatest disruptor in the presidency’s recent history. Is this trend, though, too powerful even for him to resist?
*As always, my definition of the subsidized private sector is not meant to be inclusive. It simply includes three parts of the economy – healthcare services, the for-profit education sector, and social assistance agencies – that are broken out in the Labor Department data, and that therefore are easy to identify. It should also encompass workers in sectors like defense-related manufacturing, but many of these are much more difficult to quantify.