Here’s how bad America’s employment performance has been so far this year. Not only has job creation lagged quantitatively. But by one key measure that RealityChek has followed for years, job quality worsened, too. Specifically, after falling significantly during the first two years of the Trump administration as a share of total hiring, job creation in what I call the subsidized private sector of the economy is up sharply.
To review, the subsidized private sector – dominated by healthcare services – consists of those industries that are typically classified (including by federal government statisticians) as private sector industries, but whose levels of activity (including job creation) are determined largely by politicians’ decisions about levels of government support, not market forces.
This observation doesn’t imply any conclusion that subsidized private sector jobs are merit-less. But it does reflect the understandable and commonly held belief that the genuine private sector is the economy’s main source of productivity growth and innovation, and that therefore it should dominate job creation as well.
The main evidence comes in the form of the figures on the subsidized private sector’s share of total hiring in America, of hiring in the private sector as conventionally defined (which includes the subsidized numbers), and of hiring in the “real private sector” (the total resulting from subtracting the subsidized private sector from the conventionally defined private sector figures). And since we only have data for the first six months of this year (including those for June, which are still preliminary), the time frames compared here will consist of the first six months of each year since the June, 2009 beginning of the current economic recovery).
During the first six months on Mr. Trump’s watch, net new subsidized private sector job creation accounted for 22.29 percent of total job creation (“non-farm” hiring, as the Bureau of Labor Statistics – BLS – defines it), for 23.41 percent of such hiring in the conventionally defined private sector, and of 30.57 percent of the net new jobs in the “real private sector.”
During the first six months of 2018, these shares all declined – to 18.85 percent, 19.75 percent, and 24.61 percent, respectively. At least as important, they were among the lowest recorded during the current recovery. In particular, they were all lower than they were during the first six months of President Obama’s last year in office – when they reached 28.57 percent, 31.57 percent, and 46.13 percent. That is, from January through June of 2016, the increase in subsidized private sector payrolls was nearly half as large as all net new hiring in the rest of the private sector (the “real private sector”) – which is much larger.
But during the first six months of this year, the subsidized private sector made a tremendous comeback.
These industries’ share of total net new U.S. hiring jumped from 18.85 percent to 30.88 percent. Its share of conventionally defined private sector hiring rose from 19.75 percent to 33.06 percent. And net payroll increases in the subsidized private sector compared with “real private sector” payroll increases more than doubled – from 24.61 percent to 49.38 percent.
Even worse, all three results were the highest registered during the current recovery.
The only (mildly encouraging) news on the job quality front in this respect (accepting my assumption that relatively weak job creation in the “real private sector” is a troubling development): On a standstill basis (representing a snapshot, not measuring rate of change), the combined share of total hiring accounted for by the subsidized private sector and the public sector keeps falling. But that’s clearly because job creation in the public sector proper remains weak.
At the onset of the last recession – at the end of 2007 – these jobs amounted to 29.84 percent of all U.S. jobs tracked by the BLS. When the recovery began, this figure had increased to 32.20 percent. By last June, it has dipped to 30.94 percent. And as of this past June (again, preliminarily), it was down to 30.87 percent. That’s still higher than when the last recession began, so it’s possible to argue that the American labor market still hasn’t fully normalized. If the subsidized private sector’s recent job creation resurgence isn’t interrupted, such normalization will become an ever more distant goal.