The U.S. government’s latest jobs report makes clear that the economy is well past the impact of the latest hurricane season, so it’s a great time to see if a new development in the makeup of American employment and hiring that began to appear this year. And last Friday’s non-farm payrolls figures (for November) confirm that it’s still in place: What I call the subsidized private sector is losing some noteworthy steam as a prime engine of the economy’s job creation during the current economic recovery, while the remaining “real private sector” is gaining momentum.
Not that the subsidized private sector – which consists of industries like healthcare, whose levels of output and therefore employment depend heavily on government subsidies – is a spent job-creation force. In fact, its share of total U.S. jobs on a standstill basis remains much higher than either at the start of the ongoing recovery and than at the onset of the last recession. But the growth curve has taken a significant bend down over the past year. And that’s good news if you believe – as you should – that the most sustainable type of job creation is that spawned by the part of the economy that’s shaped overwhelmingly by market forces.
First let’s look at the numbers over the last few years. For the first eleven months of 2017 (the new November figures are of course preliminary), the subsidized private sector accounted for 21.97 percent of all the economy’s net new hiring. That’s still considerably more than its share of employment last month (15.82 percent). But it’s significantly lower than the eleven-month share from last year – 24.12 percent.
In fact, this 2016-2017 decrease is the first such annual decline in several years. From 2013 to 2015, the number grew from 12.28 percent to 15.82 percent to 23.93 percent.
The converse has also been true: The real private sector’s share of total net new job creation has rebounded this year after falling since 2013: Here are those January-November numbers:
2013: 89.58 percent
2014: 80.09 percent
2015: 70.81 percent
2016: 66.47 percent
2017: 75.84 percent
Nonetheless, the subsidized private sector has built up such powerful employment momentum that its share of total non-farm payrolls (NFP) and of real private sector (RPS) jobs keeps growing. Here’s where it’s stood on some key recent dates.
December, 2007 (recession onset): 13.22 percent of NFP, 18.72 percent of RPS
June, 2009 (recovery start): 14.97 percent of NFP, 22.08 percent of RPS
November, 2017 (latest): 15.82 percent of NFP, 22.92 percent of RPS
Yet the momentum has waned a bit more recently, as the data from the last few Novembers shows:
November, 2014: 15.44 percent of NFP, 22.40 percent of RPS
November, 2015: 15.59 percent of NFP, 22.60 percent of RPS
November, 2016: 15.72 percent of NFP, 22.80 percent of RPS
November, 2017: 15.82 percent of NFP, 22.92 percent of RPS
In other words, between November, 2014 and November, 2015, the subsidized private sector’s share of NFP increased by 0.97 percent and of RPS by 0.89 percent.
Between the following Novembers, these growth rates had slowed to 0.83 percent and 0.88 percent, respectively. But they slowed much more significantly over the subsequent year (through last month) – to 0.64 percent and 0.53 percent, respectively.
This slowdown, moreover, could speed up if major changes are made in the nation’s healthcare system, as still seems distinctly possible. In turn, these developments look like a big economic wild card going forward. For now, though, better quality job creation has joined slightly better quality economic growth as two hallmarks of President Trump’s first year in office. Whether he’s had anything to do with them or not, they’re pieces of good economic news that shouldn’t be overlooked.