Since we get a breather till the last week of the month in the flow of major nation-wide U.S. economic data, why not revisit one of my favorite unofficial measures of the American economy’s health? That’s the share of job creation that’s accounted for by what I call the subsidized private sector – those parts of the economy – notably healthcare services – that are officially classified as private sector industries, but that don’t really deserve the label because they depend so heavily (including for employment levels) on massive government subsidies.
This distinction matters, or should matter, because nearly all Americans rightly believe that the private sector, not the government, is the economy’s best hope for productive, sustainable growth. In turn, genuine private sector job creation is a much better gauge of the economy’s health than private sector job creation whose numbers are inflated by including the subsidized industries’ performance.
So I’m glad to report that the results for the first three-quarters of this year (through September) show the continuation of a trend I’d spotted a while ago: The subsidized private sector’s share of new total jobs and new private sector jobs is considerably lower so far during the Trump years than during Barack Obama’s presidency. At the same time, the subsidized private sector is still punching above its weight in terms of job creation, which isn’t such good news.
Let’s start, as usual, with 2013, since it was a year by which time the current economic recovery (which began in mid-2009) was well established. Conveniently, it also permits examining progress over a five-year period.
Between January and September, 2013, the subsidized private sector generated 11.14 percent of the economy’s total net new jobs created, and 10.83 percent of all the such jobs credited to the private sector as conventionally defined. The “real private sector,” meanwhile, produced fully 91.79 percent of the economy’s new hires, and 89.17 percent of the employment improvement placed in the conventional private sector category. (A drop in government employment accounts for the failure of these percentages to add up to 100.)
But what a change by 2016 – the last year of the Obama administration. During the first nine months of that year, the subsidized private sector’s share of total payroll increases had more than doubled – to 23.04 percent. And its share of all the conventional private sector jobs added during this period rose even faster – to 27.92 percent. Largely as a result, the real private sector accounted for only 59.43 percent of all net new U.S. employment. And the real private sector’s share of job gains credited to the conventionally defined private sector dropped to 72.06 percent.
So far this year, the subsidized private sector’s share of all U.S. job creation is down to 19.73 percent. The real private sector share of this total bounced all the way back to 76.27 percent, and its share of conventional private sector job gains was up to 79.44 percent.
But between 2017 and 2018, progress along these lines was much slower than during the previous year. In fact, when examined on a stand-still basis (different from the dynamic basis represented by the above employment change numbers), the subsidized private sector’s share of total U.S. employment actually has edged up over the last year – from 15.85 percent to 15.89 percent, and these industries’ share of conventionally defined private sector employment remained at 18.69 percent.
With the subsidized private sector’s share of total job-creation this year nearly four percentage points higher (the 19.73 percent referred to in the previous paragraph), it’s clear that these industries keep creating an outsized share of overall new U.S. hiring.
As always, please remember that I’m not portraying the subsidized private sector as worthless or only marginally important. Of course we need healthcare services in particular, and as the American population continues to age, we’ll continue to need a lot more. All I’m saying is that the nation needs to define its terms properly, and recognize that, without immense government spending (and the consequently greater debts), many of the jobs we’ve come to consider private sector jobs simply wouldn’t exist.