Although economic cycles don’t care about human calendars, humans do. So with last Friday’s release of the preliminary U.S. jobs figures for June, at the mid-year point, it’s as good a time as any to update RealityChek‘s monitoring of one of my favorite trends: The extent to which private job creation in America is actually job creation in government-subsidized sectors, notably health care services – which belong in a separate category because their overall growth and therefore employment levels depend so heavily on political leaders’ largesse, not only market forces.
When I last checked (in a February post that examined the full-year 2017 data), the news looked pretty good. After rising strongly during the Obama administration, the subsidized private sector’s share of total employment growth fell notably during the Trump administration’s first year in office. That’s encouraging not because subsidized private sector jobs aren’t needed, but because unless everything known or believed about economics is wrong, those jobs are bound to be less productive than jobs in the “real” private sector.
The June jobs statistics show that this positive development remains intact.
To generate the best (apples-to-apples) numbers, let’s compare the relevant numbers for the first six months of each of the last five years.
In 2013, the subsidized private sector generated 11.20 percent of the net new employment gains achieved by the economy between January and June. This figure rose every year through 2016, when it reached 28.95 percent.
During the first six months of 2017, however, the subsidized private sector’s share of total job growth fell to 23.25 percent. And though June, it’s down to 18.88 percent so far in 2018.
Just as important, the prominence of real private sector job creation is up considerably during this period. This development becomes clear when comparing employment growth in these two private sectors.
For the first six months of 2013, subsidized private sector job growth (135,000) represented 10.78 percent of conventionally defined private sector job growth (1.252 million). By 2016, its share had nearly tripled – to 31.47 percent (315,000 out of 1.001 million overall private sector jobs created.
But between January and June, 2017, the subsidized private sector accounted for only 23.64 percent of the overall private sector’s job growth, and the comparable number for this year has fallen to 19.03 percent (243,000 out of 1.277 million conventionally defined private sector jobs). That’s still nearly twice as high as in 2013, but two straight years of decline portends well for the economy, all else equal.
The American employment scene is hardly devoid of major problems – notably wages whose growth has been sluggish before accounting for inflation and that have been falling when adjusted for price increases. Moreover, with the U.S. population continuing to age, healthcare services in particular are inevitably going to remain a major source of employment for the foreseeable future. Still, signs that hiring momentum is swinging back to the real private sector shouldn’t be minimized. Maybe they’re even worth a presidential tweet.