(What’s Left of) Our Economy: Manufacturing’s Out of its (Short Term) Jobs and Wages Doldrums

Tags

Bureau of Labor Statistics, Employment, inflation adjusted wages, Jobs, manufacturing, non-farm payrolls, recession, recovery, wages, {What's Left of) Our Economy

American domestic manufacturing created 16,000 net new jobs in July on month, its best such performance since February’s 22,000. Coupled with a major (11,000) upward revision for June, the figures demonstrated that U.S. industry has for now emerged from a springtime slump. On an annual basis, manufacturing’s July 66,000 employment improvement was its strongest since February, 2016’s 69,000.

But since the current recovery began, private net job creation has topped manufacturing’s by a factor of nearly 2.5. The same story characterized pre-inflation manufacturing wages. In July, they improved sequentially faster than the private sector’s (0.53 percent to 0.34 percent) but lagged year-on-year (2.42 percent to 2.53 percent) and trailed the previous Julys’ 3.13 percent. And during the current recovery, the private sector’s current dollar wages have increased nearly 20 percent faster than manufacturing’s, although the gap has narrowed year-on-year. But despite its good last two months, manufacturing’s share of total nonfarm employment remained at a record low of 8.47 percent.

Here’s my analysis of the latest monthly (July) manufacturing figures contained in this morning’s employment report from the Bureau of Labor Statistics:

>U.S. domestic manufacturing net new job creation and wage gains both accelerated sequentially in July, pulling the sector out of a sluggish spring on both fronts.

>Industry’s monthly July jobs gain of 16,000 was its best such performance by far since the 22,000 payrolls improvement in February. Moreover, June’s initially reported 1,000 employment increase is is now judged to have been more than ten times greater (12,000).

>Fiurther, the July figures showed that manufacturing payrolls swelled by 66,000 year-on-year in July – the best annual gains since February, 2016’s 69,000.

>Monthly pre-inflation manufacturing wages growth picked up notably as well in July, from an upwardly revised 0.19 percent in June to 0.53 percent. In May, manufacturing paychecks actually fell on a current dollar basis – by an upwardly revised 0.26 percent.

>Manufacturing’s June sequential pre-inflation wage gains equaled those of the overall private sector, and beat the private sector’s 0.34 percent performance in July.

>Over the longer term, however, manufacturing lagged the overall private sector in both respects, although the paycheck gap has been narrowing slightly recently.

>During the current economic recovery, which began in mid-2009, manufacturing employment is now up by 5.96 percent. Private sector jobs as a whole are up by 14.58 percent during this period.

>Since the late-2007 onset of the last recession, manufacturing’s performance is equally poor. From that time to the early 2010 troughs, manufacturing lost 2.293 million jobs and private sector payrolls shrank by 8.801 million.

>Since then, manufacturing has regained just 42.39 percent of those lost jobs (a total of 972,000). The private sector as a whole has boosted employment by 17 million.

>As a result, total private sector employment is now 7.08 percent higher than at the recession’s late-2007 onset, but manufacturing employment is still 9.61 percent lower.

>Therefore, it’s no surprise that manufacturing’s share of total nonfarm employment in July stayed stuck at its all-time low level of 8.47 percent.

>Wage trends reveal the same manufacturing relative weakness. Industry’s July annual current dollar wage gains of 2.42 percent were lower than the overall private sector’s 2.53 percent. They were also much lower than the 3.13 percent increase recorded for manufacturing during the previous Julys.

>Manufacturing wages before inflation have fared little better during the recovery. As of July, they were up by 15.99 percent since the economy resumed expanding in mid-2009. But overall private sector wage increased by 19.06 percent – 19.20 percent faster.

>Last July, though, the gap was bigger – 23.24 percent.

>Manufacturing generally performs even worse on an inflation-adjusted basis. The latest figures are for June, and show a sequential manufacturing gain of 0.18 percent versus a 0.28 percent read for the private sector overall.

>Year-on-year, real manufacturing wages have risen by only 0.55 percent. That’s both slower than the private sector’s 0.94 percent and manufacturing’s own 2.46 percent constant dollar rise between July, 2015 and July, 2016.

>During the entire recovery, overall private sector real wages are up 4.56 percent as of June – 2.87 times faster than the manufacturing real wage improvement (1.59 percent).

>As bad as that comparison looks, it’s actually narrower than the gap last year – when overall private sector wages had increased 3.48 times faster after inflation than manufacturing wages.

(What’s Left of) Our Economy: What “Retail-pocalypse”?

Tags

bricks and mortar, electronic retailing, Employment, hiring, job openings, Jobs, JOLTS, on-line shopping, private sector, retail, {What's Left of) Our Economy

Could the evidence be clearer? President Trump constantly bewails job losses in parts of the economy like manufacturing and coal mining. But he’s ignoring the much larger employment bloodbath in the nation’s retail sector. Worse, the contrast shows what a racist and sexist Trump is, since minorities and women make up much larger shares of the workforce in retail than in factories and mines.

Here’s one answer: The evidence for these propositions could be a lot clearer. Indeed, according to the U.S. government’s employment statistics, it doesn’t exist.

I decided to look at the numbers because the JOLTS data for May came out this morning, and I was once again amazed at the results for retail. As known by RealityChek regulars, these data measure turnover in the labor force, and are highly regarded by no less than Fed Chair Janet Yellen – a leading labor economist. The new figures, which are still preliminary, show that American retailers claimed 638,000 job openings in their businesses, and hired 718,000 new workers (the latter data represent total positions filled, not net new hires).

It’s true that the openings numbers in particular can be dicey. But those for this past May seem pretty consistent with the data going back many years. Moreover, they show that over the last eight years (practically the length of the current economic recovery), retail openings have more than doubled, and hires are up by nearly 31 percent. Both indicators are lower than that for the private sector as a whole (where job openings are up 140.14 percent, and hires are up 45.24 percent since May, 2009). But the gap is hardly yawning. Nor is there any indication from the JOLTS data that retail openings or hires have lost major – or any – momentum in the last few years.

The actual net new job-creation numbers don’t reveal any “retail-pocalyse,” either. Since June, 2009 (when the current recovery officially began) retail payrolls have grown by nine percent. That’s slower than the increase overall private sector employment (14.39 percent). But the gap proportionately was actually greater during the previous recovery, when private sector employment rose by 5.83 percent, and the retail sector’s staffing was up by 3.18 percent.

Maybe this is because, as widely reported, jobs are migrating from bricks and mortars retail stores to on-line shopping businesses? Absolutely. And this trend is indeed rising in importance. During the previous recovery (which only lasted six years, from the end of 2001 through the end of 2007), electronic retail employment rose by 64 percent – just about a third as fast as during the current recovery (174.44 percent).

But in absolute terms, the electronic retail sector is hardly a mass employer. Its workforce totaled less than 260,000 as of this May. Retail overall employed just under 15.85 million that month, and during the recovery, bricks and mortars payrolls grew by a not-too-shabby 1.14 million.

At the same time, the actual employment figures do show that retail hiring is running out of steam, at least for the time being. Year-on-year, the sector boosted payrolls by just 0.12 percent. The previous two May-May annual increases? 1.37 percent between 2015 and 2016, and 1.71 percent the year before. By contrast, employment grew by 12.22 percent in electronic retailing from May, 2016 to May, 2017, and by 12.60 percent the year before. So conventional stores are now losing employees on net.

At the same time, these results are a far cry from a blood-letting. And annual job-creation in the overall private sector has been slowing as well. Further, many observers insist that bricks and mortars companies long built way too many stores. So their payrolls (and overall scale) may, at least to some extent, simply be returning to more sustainable levels. These conclusions obviously won’t satisfy the Trump-haters among us. They’re simply consistent with the facts.

(What’s Left of) Our Economy: Where the Trump Record is Looking Different

Tags

Barack Obama, Bureau of Labor Statitics, Employment, Great Recession, healthcare, Jobs, Mainstream Media, private sector, real private sector, recovery, subsidized private sector, Trump, {What's Left of) Our Economy

Since of course there’s no Mainstream Media bubble or echo chamber, it must be a total coincidence that the press last week was filled with articles noting that the U.S. economy today (which President Trump keeps praising) looks pretty similar to the U.S. economy before the last presidential election (which candidate Trump decried).

Generally speaking, these observations are right – with one important exception that’s been universally overlooked: Job creation this year so far has owed significantly more to the “real private sector” of the American economy and less to the “subsidized private sector.” That is, more hiring is coming in the part of the economy in which employment levels generally reflect free market forces, and therefore speak volumes about the whole economy’s fundamentals. And less hiring is taking place in industries like healthcare services, where job creation largely reflects levels of government support that stems from political decisions. Therefore, however worthy their services, employment performance in these sectors says little about the state of the economy.

RealityChek observed the possible start of this trend two months ago. Now that we’re halfway through the year, it looks more solidly established. As usual, the best evidence comes from comparing job creation in the first six months of this year with job creation during the same periods in past years. (Keep in mind, however, that the statistics for May and June, 2017, are still preliminary; that is, they’ll be revised in the next two months – and then revised again early next year along with the results for all of 2017. For good measure, the Bureau of Labor Statistics will recalculate them again further down the road.)

For the first six months of this year, total U.S. net employment gains (in the “non-farm” sector that represents the Bureau of Labor Statistics’ American employment universe) came to 1.079 million. Of these, 20.95 percent came in the subsidized private sector, and 74.05 percent came in the real private sector. (The rest came in government at all levels.)

Those figures are much different than those for the first six months of 2016 – 28.44 percent and 60.83 percent. In fact, the January-June 2017 results represent the first time since 2014 when the subsidized private sector share of total job creation fell and the real private sector share rose. At the same time, the subsidized private sector’s role in total hiring is way up from January-June, 2013 – when it was only 14.22 percent. And the real private sector’s role is way down (from 92.63 percent that year).

Another way to look at hiring developments: During the first half of 2013, subsidized private sector job creation totaled 13.31 percent of job creation in the private sector as it’s conventionally defined (that is, including the subsidized industries). By the first half of 2016, the subsidized industries’ share of conventionally defined private sector net new employment had more than doubled: to 31.86 percent.

Finally, let’s see how these employment numbers have changed on a stand-still basis.

In December, 2007 – on the eve of the Great Recession – the subsidized private sector accounted for 13.22 percent of all non-farm jobs, the share of the private sector conventionally defined was 83.83 percent, and that of the real private sector was 70.62 percent.

In June, 2009 – when the recovery began – these figures were: subsidized private sector, 14.97 percent; conventional private sector, 82.77 percent; and real private sector, 67.80 percent.

And this June? Subsidized private sector, 15.78 percent; conventional private sector, 84.73 percent; and real private sector, 68.96 percent.

In other words, although the punch has slacked off a bit, the subsidized private sector is still punching above its weight when it comes to job creation. We know this because its share of new hiring for the first six months of this year (20.95 percent) remained greater than its share of total American employment as it stood in June (15.78 percent). The real private sector is outperforming, too, but the gap is much smaller proportionately.  (The – big – slacker has been the public sector.)

Also, eight years into the current economic recovery, the real private sector’s share of total American jobs is smaller, and the subsidized private sector’s share is larger, than they were at the start of the expansion.

There’s no doubt that the American job market today is in much better shape than it was at the start of the recovery – and that most of this progress took place before President Trump took office. Nor is there much reason to doubt that until the economy’s reliance on the subsidized private sector for job creation falls considerably more, it will difficult to claim legitimately that the employment scars of the recession have fully healed. But something else that’s now increasingly clear is that a crucial job quality front, the Trump economy is looking notably different – and better.    

(What’s Left of) Our Economy: Manufacturing Job Creation is Stagnating Again

Tags

Bureau of Labor Statistics, Employment, inflation-adjusted wages, Jobs, manufacturing, non-farm payrolls, real wages, recovery, wages, {What's Left of) Our Economy

American domestic manufacturing created 1,000 net new jobs in June, but the figures underscored that the sector’s employment gains have nearly petered out recently. Including modest (3,000) downward revisions, industry’s employment has grown by only 8,000 since March. Largely as a result, manufacturing’s share of total nonfarm jobs hit a new record low – just under 8.47 percent.

Pre-inflation manufacturing wages ticked up sequentially in June (by 0.08 percent) and the pace of annual increases rose from May’s 1.92 percent to 2.08 percent. But these advances remained the lowest since October, 2015 (2.17 percent), and industry pay continued lagging that of the overall private sector, although the gap between their rates of increase narrowed over the past year – from 22.72 percent to 22.43 percent.

Here’s my analysis of the latest monthly (June) manufacturing figures contained in this morning’s employment report from the Bureau of Labor Statistics:

>U.S. domestic manufacturing grew by 1,000 on net in June, but this modest number not only contrasted with the solid employment performance registered by the economy as a whole. It also revealed that industry’s net job creation has nearly ground to a halt.

>Including total negative revisions for April and May of 3,000, domestic manufacturers have increased payrolls by only 8,000 since March.

>Largely as a result, manufacturing’s share of total nonfarm employment sank in June to just under 8.47 percent – a new all-time low.

>After falling on month at an upwardly revised 0.34 percent in May, nominal manufacturing wages edged up sequentially in June by 0.08 percent. Yet evidence persisted of a wage lag suffered by manufacturing workers.

>The current dollar monthly wage gain for private sector workers overall was 0.15 percent – nearly twice as great as that for their manufacturing counterparts.

>The same situation held for annual wage trends. Year-on-year, manufacturing pre-inflation wages rose only 2.08 percent in June. The private sector improvement was 2.46 percent.

>Moreover, the June yearly manufacturing wage advance, along with May’s upwardly revised 1.92 percent rise, were the lowest since October, 2015’s 2.17 percent.

>Between the previous Junes, pre-inflation manufacturing wages increased by 3.47 percent.

>On a pre-inflation basis, manufacturing’s wage increases during the current economic recovery still trail those of the private sector, although the gap has narrowed slightly over the last year.

>As of June, 2016, private sector pre-inflation wages were up by 15.72 percent during the expansion (which began in mid-2009) and manufacturing wages were up 12.81 percent. Therefore, private sector wages had risen by 22.72 percent faster than manufacturing wages.

>As of this June, private sector pre-inflation wages were up by 18.56 percent during the recovery, while manufacturing pay was up by 15.16 percent. Therefore, the gap between the rates of increase had shrunk to 22.43 percent.

>Factoring in inflation darkens manufacturing’s wage picture. The latest data are from May, but they show that that month, real manufacturing wages fell sequentially by 0.28 percent while they rose by that amount for the entire private sector.

>Year-on-year in May, the 0.56 percent increase in inflation-adjusted private sector wages was unimpressive. But it beat manufacturing’s performance – which flat-lined. Between May, 2015 and May, 2016, after-inflation manufacturing wages increased by 2.45 percent.

>During the entire recovery, overall private sector real wages are up 4.27 percent. For manufacturing? Less than half that improvement: 1.49 percent.

>Manufacturing’s June year-on-year jobs increase of 49,000 greatly exceeded the previous Junes’ annual increase of 9,000, underscoring the sector’s recent exit from an employment recession.

>Nonetheless, over the longer term, manufacturing has continued to lag the private sector overall on the payroll front.

>During the current economic recovery, which began in mid-2009, manufacturing employment has grown by only 5.71 percent. For the private sector as a whole during the expansion, it’s up by 14.39 percent.

>Since the late-2007 onset of the last recession, manufacturing’s performance is equally poor. From that time to the early 2010 troughs, manufacturing lost 2.293 million jobs and private sector payrolls shrank by 8.801 million.

>Since then, manufacturing has regained just 41.12 percent of those lost jobs (a total of 943,000). The private sector as a whole has boosted employment by 16.794 million.

>As a result, total private sector employment is now 6.91 percent higher than at the recession’s late-2007 onset, but manufacturing employment is still 9.82 percent lower.

(What’s Left of) Our Economy: May Sees First Manufacturing Jobs Drop in Six Months, but Wages Ride a Roller-Coaster

Tags

Bureau of Labor Statistics, Employment, inflation-adjusted wages, Jobs, manufacturing, recession, recovery, wages, {What's Left of) Our Economy

May’s monthly manufacturing employment drop of 1,000 ended the sector’s five-month string of sequential employment gains – its best such stretch since a near two year-long span between 2013 and 2015. Industry’s wages, though, roller-coastered for the second consecutive month, with May’s 0.45 percent pre-inflation drop (the worst) since last November’s 0.48 percent) following an upwardly revised jump of 0.76 percent in April (the best since October, 2008’s 0.81 percent, when the Great Recession was beginning).

Although manufacturing payrolls shrank in May, they still registered their biggest annual increase (63,000) since February, 2016 (69,000), and reversed the slight (2,000) decline between the previous two Mays. Yet these performances couldn’t change manufacturing’s status as a longer-term job-creation and wages laggard. Indeed, not only did its current dollar wages fall on month, but their annual increase was the slowest (1.86 percent) since July, 2014’s 1.57 percent. Further, the gap between the pre-inflation growth of industry’s paychecks and those of the private sector generally has been widening. March and April manufacturing employment revisions produced a net employment gain of 3,000.

Here’s my analysis of the latest monthly (May) manufacturing figures contained in this morning’s employment report from the Bureau of Labor Statistics:

>May brought an end to manufacturing’s best (five-month) sequential job gains string since 2013-2015, as payrolls dipped 1,000 below April’s levels.

>At the same time, industry’s pre-inflation wages seemed to climb aboard a roller-coaster. May’s 0.45 decline was the biggest since November, 2008’s 0.48 percent decrease. Bt it followed an upwardly revised April 0.76 percent jump – the biggest since October, 2008’s 0.81 percent – which was aided by many companies that perceived the start of the last recession cutting labor costs by laying off mainly less experienced, lower-paid workers.

>Even with May’s monthly employment drop, manufacturing’s year-on-year job gain of 63,000 was still the largest such number since February, 2016’s 69,000. More impressive, between the previous two Mays, manufacturing lost 2,000 jobs on net.

>Nonetheless, over the longer term, manufacturing has continued to lag the private sector overall on the payroll and paycheck fronts.

>During the current economic recovery, which began in mid-2009, manufacturing employment has grown by only 5.73 percent. For the private sector as a whole during the expansion, it’s up by 13.74 percent.

>Since the late-2007 onset of the last recession, manufacturing’s performance is equally poor. From that time to the early 2010 troughs, manufacturing lost 2.293 million jobs and private sector payrolls shrank by 8.801 million.

>Since then, manufacturing has regained just 41.21 percent of those lost jobs (a total of 945,000). The private sector as a whole has boosted employment by 16.574 million.

>As a result, total private sector employment is now 6.72 percent higher than at the recession’s late-2007 onset, but manufacturing employment is still 9.81 percent lower.

>Similar trends have played out in terms of both pre-inflation and after-inflation wages.

>Manufacturing’s 0.45 percent May monthly current dollar wage decline was considerably worse than the private sector’s 0.15 percent improvement.

>Year-on-year, manufacturing pre-inflation wages rose only 1.85 percent – not only much more sluggishly than the 3.46 percent increase between May, 2015 and May, 2016, but the weakest such rate since July, 2014 (1.57 percent).

>On a pre-inflation basis, manufacturing’s wage increases during the current economic recovery still trail those of the private sector, and the gap is widening. As of May, private sector pre-inflation wages were up by 18.43 percent during the expansion, versus a 14.99 percent increase for manufacturing wages. As a result, private sector wages had risen by 22.95 percent more over these nearly eight years than manufacturing wages.

>As of last May, however, recovery-era private sector wages were up by 15.58 percent, and manufacturing wages were up by 12.90 percent – resulting in a smaller, 20.76 percent, difference between the two.

>Adjusting wages for inflation produces a somewhat brighter picture for manufacturing. The latest figures are from April, and the sector’s after-inflation pay has been revised up from a 0.46 percent monthly gain to 0.55 percent – the best since August, 2015′ 0.66 percent. Real private sector wages in May, by contrast, has been revised down from a 0.09 monthly gain to flat.

>Year-on-year, real manufacturing wages have outperformed their private sector counterpart, too, advancing by 0.55 percent (much less, though, than the previous year’s 1.79 percent) versus 0.28 percent for the overall private sector (also much less than the previous annual increase of 1.42 percent).

>But during the current recovery, real manufacturing wages are up only 1.59 percent in toto. That’s less than half as fast as the overall private sector increase of 3.98 percent.

>Manufacturing’s March monthly job gain, which had been revised up from 11,000 to 13,000, has now been downgraded back down to 11,000. April’s previously reported 6,000 sequential employment increase has been revised up – also to 11,000.

(What’s Left of) Our Economy: Has Subsidized Private Sector Hiring Peaked (Relatively Speaking)?

Tags

CNN.com, Employment, healthcare services, Jobs, Labor Department, non-farm jobs, private sector, real private sector, recession, recovery, subsidized private sector, The New York Times, {What's Left of) Our Economy

The Snob’s Manual tells us (often correctly) that you know when the stock market’s peaked when the retail investor rushes in, and that you know when a fad is passe when the mainstream media report it. Could the same maxim be on target for economic trends, like the outsized role played by the U.S. subsidized private sector in job creation during the recovery? I’m not sure yet, but the last few sets of monthly American employment data (including last Friday’s April figures) are certainly food for thought.

As RealityChek regulars know, I’ve been spotlighting this trend since well before RealityChek was born. And it was great to see the theme picked up last month by a major reporter who covers the healthcare sector (the core of that part of the economy dubbed private sector but in fact heavily dependent on government spending). Since then, healthcare hiring’s unusual recent robustness has been covered by The New York Times and CNN.com.

Here’s the rub: So far this year, subsidized private sector job creation has become less important in the overall employment picture, not more. The March and April statistics are still preliminary, but since January, the pace of subsidized private sector hiring has ranged between 7.87 percent of total monthly job creation (in January) to 29.31 percent (in February). The April figure was right in the middle: 19.43 percent.

The subsidized private sector’s waning momentum – at least relatively speaking – comes through more clearly when the first four months of this year are compared with their last few counterparts. From January through April, 2017, subsidized private sector net new job creation (which also includes social assistance agencies and the for-profit education sector) represented 18.43 percent of the non-farm total (the Labor Department’s definition of the American employment universe.

That share is considerably higher than the figure for the first two months of 2013 and 2014 (14.56 percent and 12.53 percent, respectively). But it’s also considerably lower than the 27.68 percent for 2015 and the 23.87 percent for the same time span in 2016. In addition, these numbers show that the subsidized private sector’s importance has not fallen for two straight years.

That’s not to say that the subsidized private sector isn’t still punching above its weight. Its 19.43 percent of net new job creation was still greater than its share of total employment on a standstill basis (15.75 percent). It’s also still higher than the share at the mid-2009 onset of the current recovery (14.97 percent). And it’s much higher than the share at the start of the last recession at the end of 2007 (13.22 percent). But there’s no doubt that this year it’s not punching quite as hard.

The flip side of the equation tells a similar, but not identical, story. The “real private sector” – where job creation is determined largely by market forces, not government decisions – stood at 68.95 percent of total non-farm jobs last month. That’s actually a little higher than its share at the start of the recovery (67.80 percent). But it’s also still a little lower than its share at the start of the last recession – more than nine years ago (70.62 percent).

There’s still a long way to go in figuring out whether these early 2017 results will hold up even through the end of this year, much less whether they represent hiring that’s peaking (again, relatively speaking) in the subsidized private sector. And of course a huge question mark is hanging over this entire chunk of the economy in the form of the healthcare debate. But the real implications are unchanged. Although subsidized private sector jobs serve many valuable purposes, the more the economy leans on them to generate employment and incomes, the less dynamic and productive the nation is bound to be.

Following Up: Healthcare’s Outsized Job Creation Reported in The New York Times

Tags

Affordable Care Act, Chad Terhune, Employment, Following Up, healthcare, healthcare services, Jobs, Obamacare, private sector, productivity, subsidized private sector, The New York Times, Trump

Well this is pretty cool! A new New York Times op-ed piece has spotlighted a trend that RealityChek has long covered: how strongly the creation of healthcare services employment has dominated recent American job creation, and how this trend has been especially noteworthy since the financial crisis and Great Recession broke out nearly a decade ago.

At the same time, author Chad Terhune, who reports on the healthcare industry for Kaiser Health News and the California Health Care Foundation, explains a major dilemma being created by outsized healthcare job creation for the Trump administration: Because so many of the new jobs in the sector have been driven by the build-out of Obamacare, the president’ promise to abolish this vast new structure could endanger his broader promise to jump-start feeble U.S. economic growth and stagnating incomes.

Even worse, according to Terhune, any effort to make healthcare more affordable, or even keep it at its current affordability levels, will significantly weaken the healthcare job-creation engine.

As the author sees it, healthcare hiring got a major boost “as coverage expanded in 2014 under the [Affordable Care Act] and new federal dollars flowed in. The law gave hospitals, universities and companies even more reason to invest in new facilities and staff. Training programs sprang up to fill the growing job pool. Cities welcomed the development — and the revenue.”

Sharpening the healthcare jobs conundrum faced by the president: “rising health spending has been good for some economically distressed parts of the country, many of which voted for Mr. Trump last year.” And Terhune cites specific examples from West Virginia to Pennsylvania to Ohio and Missouri.

Just as important, the author convincingly shows that American healthcare’s success in creating employment – which clearly predates Obamacare’s passage – also largely explains its inefficiency. In Terhune’s words, because of the system’s

“redundancy, inefficiency and a growing number of jobs far removed from patient care….[l]abor accounts for more than half of the $3.4 trillion spent on American health care, and medical professionals like health aides and nurse practitioners are in high demand. But the sheer complexity of the system has also spawned jobs for legions of data-entry clerks, revenue-cycle analysts and medical billing coders who must decipher arcane rules to mine money from human ills.”

And although Terhune doesn’t make the point explicitly, this labor-intensivity means that the sector of the economy fueling so much of its output and hiring is pathetically unproductive. In other words, the more outsized growth and employment healthcare creates, the less able the entire economy will be to raise living standards on a sustainable basis.

Moreover, one big reason for this low productivity is a feature of the healthcare system – both under Obamacare and before it – not mentioned by Terhune, either, but that’s vital to recognize: As I’ve observed, although this gigantic industry is officially (and no doubt popularly) considered a part of the private sector, its scale owes largely to subsidies from the public sector, which is renowned for low productivity.

As always, RealityChek readers – and others – need to understand that placing healthcare (and similar industries, like the for-profit educational system and social assistance agencies) outside the “real private sector” is not the same as questioning its fundamental value. After all, no truly civilized society would ever reduce public policy to a quest for productivity to the exclusion of all other goals, whether economic or non-economic. Moreover, as some readers have alertly pointed out, the steady aging of the American population is bound to mean continued healthcare sector growth.

But Terhune’s article is a badly needed reminder that the economy’s heavy reliance on the current healthcare system’s employment power has major downsides. As its title indicates, it’s a “costly addiction,” and its price is bound to rise without a major overhaul of some kind.

Those Stubborn Facts: No American Exceptionalism in Employment

Tags

Employment, Jobs, OECD, Organization for Economic Cooperation and Development

U.S. employment rate*, 4Q 2016: 69.5%

Rank among members of Organization for Economic Cooperation and Development (OECD): 15

OECD average: 67.2%

*share of working-age population holding jobs

(Source: “Short-Term Labour Market Statistics,” Labour Force Statisics, OECD.Stat, Organization for Economic Cooperation and Development, http://stats.oecd.org/Index.aspx?DataSetCode=STLABOUR)

(What’s Left of) Our Economy: Why the New Jobs Report May Really Matter

Tags

Bureau of Labor Statistics, Employment, healthcare services, Jobs, non-farm jobs, real private sector, recession, recovery, subsidized private sector, {What's Left of) Our Economy

I have no idea how much credit President Trump deserves for the February U.S. jobs figures released last Friday that nearly everyone hailed as a strong performance. I feel somewhat more confident in noting that the results provided some preliminary indications – regardless of who or what deserves credit – that one of the most troubling features of the current employment recovery may have peaked.

Specifically, the February numbers show a reversal of the economy’s burgeoning reliance on what I call the subsidized private sector to generate employment gains, and a revival of the role played by the real private sector. That’s great news if these developments continue.

To summarize, the subsidized private sector consists of those American industries classified officially as private sector industries, but where levels of demand – and therefore employment – depend heavily on government subsidies. Healthcare services is the leading example. The real private sector is hardly devoid of government influence. But its levels of demand and employment are largely shaped by free market forces.

And since the real private sector leads the economy in innovation and productivity, signs that it’s regaining its relative job-creation chops deserve cheers.

I called the encouraging signs preliminary because they only cover the first two data months of this year. But they reveal that, in January and February, the subsidized private sector created only 17.55 percent of the 473,000 total net new jobs created by the economy. (Both numbers will be revised several times more.) That’s a much smaller share than the subsidized industries generated last January and February: 24.79 percent of the 363,000 net gain in employment.

The same conclusions flow from another set of data. During the first two data months of this year, the subsidized private sector accounted for 18.53 percent of the total employment improvement of the private sector as it’s conventionally defined by the Bureau of Labor Statistics. During the first two months of last year, that figure was 27.19 percent.

At the same time, the subsidized industries clearly are still punching above their weight on the employment front. In 2013, their two-month share of all net new jobs was only 13.48 percent, and of conventionally defined private sector jobs, 13.59 percent.

Looking at the economy on a standstill basis also reveals the importance of subsidized private sector job-creation. When the last recession began, at the end of 2007, it represented 13.22 percent of all non-farm payrolls (the Bureau of Labor Statistics’ U.S. jobs universe). When the current recovery began, in the middle of 2009, the subsidized private sector share had grown to 14.97 percent. And as of last month, despite the developments noted above, this percentage was up to 15.74 percent.

And this subsidized private sector growth has come in part at the expense of the real private sector. It’s share of total U.S. employment as of last month (68.94 percent) is still higher than at the recovery’s onset (67.80 percent). But it’s lower than its level at the onset of the last recession (70.62 percent).

Viewed from another perspective, when the current recovery began, as mentioned above, the subsidized private sector represented 14.97 percent of total American jobs. But since that time, it’s been responsible for 22.60 percent of total employment growth. The real private sector at the beginning of the current recovery accounted for 67.80 percent of total American jobs. And it’s share of subsequent employment growth has been higher, too (79.10 percent). But the gap between its share of employment and its role in employment growth is much lower than that of the subsidized industries.

Finally, the new jobs report contained some good news for fans of former President Obama. It revealed that from the start of the recovery that began a few months into his first term in office, through the end of his administration, hiring was slightly less subsidized private sector-heavy than originally reported.

There’s no doubt that two months’ worth of data per se hardly signal the dawn of a new, brighter era in American employment. At the same time, most trends don’t last forever. So in the months ahead, these subsidized private sector job trends will deserve more attention than ever. Indeed, they’ll be at least as important a yardstick for judging the Trump administration’s economic performance as the overall jobs totals.

(What’s Left of) Our Economy: The Real U.S. Private Sector’s Employment Role Keeps Shrinking and Shrinking

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Bill Clinton, Employment, George W. Bush, healthcare services, Jobs, Labor Department, non-farm jobs, Obama, private sector, recoveries, subsidized private sector, {What's Left of) Our Economy

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.