(What’s Left of) Our Economy: Picking Through the April Jobs Wreckage Details

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Employment, Great Depression, Great Recession, Jobs, Labor Department, manufacturing, NFP, non-farm jobs, non-farm payrolls, private sector, unemployment, {What's Left of) Our Economy

Today’s U.S. jobs report from the Labor Department (for April) is the first that makes fully (so far) clear the historic American employment disaster created by a combination of the CCP Virus and widespread economic shutdown and lockdown orders.

As widely observed already, the 14.9 percent national unemployment rate for the month is the highest suffered since the Great Depression of the 1930s. During this slump, (which, it can never be forgotten, helped pave the way for World War II), the annual jobless rate peaked in 1933 at 24.9 percent. Moreover, as always with these monthly jobs releases, the data only cover mid-month. So the May report will almost surely bring considerably worse new April revisions, just as the April report showed sharp downward revisions for March and even February.

Worse, as the Labor Department employment trackers observed, in April they were able to reach only about 70 percent of the number of households they tried contacting in their standard efforts to calculate that unemployment rate. They pre-virus response rate was 83 percent. And although it’s entirely possible that this weak response rate has overestimated unemployment, it could be producing an underestimate, too.

That big uncertainty aside, the revisions are a good place to start highlighting how the details of today’s numbers underscore what an unprecedented shock the economy is absorbing.

Principally, that March total plunge in non-farm payrolls (NFP, the Labor Department’s U.S. jobs universe) was first reported at 701,000 – a figure that was (sadly) exceeded four times during the Great Recession that followed the 2008-09 financial crisis. Now these March losses are pegged at 870,000 – much higher than the Great Recession peak of 784,000 in January, 2009. April, of course, has blown away such comparisons, as NFP plummeted by 20.50 million. Indeed, that’s the largest monthly decrease in absolute terms in the history of these Labor Department data, which go back to 1939.

As a result, U.S. employment levels are back to where they were in February, 2011 – meaning that more than nine years of jobs gains have just gone up in smoke.

In fact, those 20.500 million net jobs destroyed in April alone (again, this is a preliminary number, which will be re-estimated twice more in the next two months, and then again when Labor issues the next of its standard multi-year revisions) represent more than twice as much employment loss as that experienced during the entire Great Recession (whose jobs dimension lasted from December, 2007 until March, 2010) – 8.698 million.

As for the private sector, the initially reported March jobs collapse of 713,000 was topped five times during the Great Recession. But this morning’s new March jobs wipeout figure of 812,000 now matches that recession’s worst (hit in April, 2009). Tragically, the new April private sector job loss figure of 19.520 million makes even those dreadful numbers look positively quaint.

Oddly, even though its April monthly job loss was 1.33 million, manufacturing has continued to hold up relatively well so far during the CCP Virus crisis. Industry’s March payroll decline was revised down from 18,000 to 34,000. And the April figure was much worse than manufacturing’s worst month during the Great Recession (289,000, recorded for January, 2009). Moreover, the 1.330 million April manufacturing employment nosedive was more than half of the total manufacturing job decrease during the entire Great Recession (2.293 million).

All the same, since February, whereas total U.S. job totals are off by 14.02 percent since February, and private sector employment has fallen by 15.70 percent, manufacturing’s drop has been 11.87 percent.

Once more, this relatively bright picture could change either with next month’s NFP report, or relatively quickly thereafter, as the economy reopens. But it’s also important to keep in mind that the pre-Great Recession total U.S. employment peak of 138.392 million in December, 2007 wasn’t matched again until May, 2014. It took until March, 2014 for the private sector to regain its pre-recession employment peak of 116.060 million. And manufacturing has never regained its pre-recession level of 13.746 million – which itself was far from a peak, because its payrolls had been decreasing for decades. The best it did was to regain 1.413 million (61.62 percent) of the 2.293 million jobs lost during the Great Recession. This level was hit just last December.

And all these recoveries were reasonably “V-shaped” (that is rapid), by historical standards. Unfortunately, “V” seems to be a letter going out of style as economists struggle to figure out what the post-CCP Virus recovery will look like.

(What’s Left of) Our Economy: Manufacturing Job Creation Softened a Bit in May; Wages (Literally) Went Nowhere

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Employment, inflation-adjusted wages, Jobs, manufacturing, non-farm jobs, private sector, recession, recovery, wages, {What's Left of) Our Economy

I was on some travel yesterday and couldn’t put out my usual same-day, post. But here’s my analysis of the latest monthly (May) manufacturing figures contained in that morning’s employment report from the Bureau of Labor Statistics:

>U.S. manufacturing job creation shifted into a somewhat lower gear in May, with its 18,000 sequential gain the smallest such improvement since last September’s 6,000. Revisions left the last February through April monthly totals unchanged on net.

>Worse news, moreover, came on the manufacturing wages front. Pre-inflation hourly pay flat-lined on month in May – its worst such results since last November’s similar performance. In addition, April’s previously reported 0.15 percent monthly manufacturing constant dollar wage gain was revised down to 0.15 percent.

>By contrast, overall current dollar private sector wages saw their best monthly improvement (0.30 percent) since December’s 0.38 percent.

>As a result, May’s year-on-year manufacturing wage improvement before inflation totaled only 1.85 percent. Between the previous Mays, pre-inflation manufacturing wages advanced by 2.12 percent.

>These increases also lagged those for the overall private sector, where current dollar wages rose by 2.71 percent on year in May. That was the best such performance since January’s 2.77 percent. And it exceeded the 2.46 percent private sector wage gain between May, 2016 and May, 2017.

>Consequently, the wage gap between manufacturing and the overall private sector widened significantly between last May and this. As of last May, during the current economic recovery, pre-inflation private sector wages had increased 21.24 percent faster than manufacturing wages. This May, the difference was up to 28.13 percent.

>Despite May’s somewhat weaker manufacturing employment growth, the sector’s share of total non-farm employment (the Bureau of Labor Statistics’ U.S. jobs universe) remained at just under 8.53 percent. Last May, manufacturing accounted for just under 8.49 percent of total non-farm employment, meaning that during the last year, manufacturing payrolls have grown slightly faster than American payrolls in general.

>In fact, manufacturing’s May year-on-year job creation (259,000) was a tremendous improvement from the figure between the previous Mays (78,000) and the best annual gain since May, 1998’s 262,000.

>Over the longer-term, however, manufacturing remains a significant job-creation laggard. Since it’s latest employment bottom, in February and March, 2010, it’s regained 1.22 million (53.21 percent) of the 2.293 million jobs lost during the recession and its immediate aftermath.

>The overall private sector lost 8.780 million jobs from the year-end 2007 onset of the recession through February, 2010. Since then, it’s created 19.086 million net new jobs.

>Moreover, since the recession’s onset, the private sector has boosted its employment by 8.88 percent. But manufacturing payrolls are still down 7.81 percent from their December, 2007 levels.

>Manufacturing has been an even worse real wage laggard. The latest inflation-adjusted data go through April, and show that manufacturing couldn’t even match the monthly flat-line in private sector wages. In manufacturing, pay between March and April dipped by 0.09 percent.

>Year-on-year, private sector after-inflation wages inched up only 0.19 percent in April, but even that negligible growth handily beat manufacturing’s 1.10 percent decline. Between the previous April’s inflation-adjusted manufacturing wages improved by 0.55 percent.

>Indeed, both the private sector and manufacturing continue to experience technical real wage recessions (periods of cumulative shrinkage lasting at least two quarters). But in the private sector, such pay is off only 0.09 percent since last May. In manufacturing, real wages are down by this amount since January, 2016.

>And whereas private sector wages are up 4.17 percent in real terms during the current economic recovery (which is nearly nine years old), their manufacturing counterpart gained only 0.37 percent – less than a tenth as much.

(What’s Left of) Our Economy: Strong Manufacturing Jobs Numbers Still Aren’t Moving the Wages Needle

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automotive, Bureau of Labor Statistics, Employment, Great Recession, inflation-adjusted wages, Jobs, manufacturing, non-farm jobs, private sector, recovery, wages, {What's Left of) Our Economy

February’s jobs report showed a continuation of strong employment numbers and weak wage performance in manufacturing. The latest 31,000 monthly jobs gain kept up a streak of strong sequential jobs increases that began in July. Manufacturing’s 224,000 year-on-year payrolls increase was its best such improvement since May, 1998’s 262,000. Revisions boosted the sector’s employment by 28,000 for December and January. Manufacturing has now regained 50.63 percent of the net jobs it lost during the Great Recession, and it since last February, has raised its share of overall U.S. employment from 8.49 percent to 8.51 percent. The automotive sector, moreover, ended a technical jobs recession that had begun in April, 2016.

Yet current dollar wages flat-lined sequentially in February for manufacturing, while they grew by 0.15 percent for the overall private sector. And the yearly manufacturing wage advance of 1.67 percent was the slowest since July, 2015’s 1.49 percent. Further, in real terms, both manufacturing wages and private sector wages are in technical recession, with the former down on net since January, 2016 and the latter since last May.

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

>February’s strong monthly employment gains and major upward revisions combined to bolster considerably manufacturing’s recent jobs performance.

>Industry’s payrolls grew by 31,000 sequentially in February, while its January jobs increase was revised up from 15,000 to 25,000, and December’s from 21,000 to 39,000.

>Largely as a result, manufacturing payrolls jumped by 224,000 on an annual basis – the best such performance since May, 1998’s 262,000.

>Between the previous Februarys, manufacturing jobs grew by just 23,000.

>Moreover, the year-on-year figures mean that manufacturing employment has been growing faster than employment in the economy’s non-farm sector (the Bureau of Labor Statistics’ American employment universe).

>Last February, manufacturing accounted for 8.49 percent of total non-farm payrolls. This February, its share stood at 8.51 percent.

>Manufacturing has now regained more than half (50.63 percent) of the 2.293 million jobs it lost since the late-2007 onset of the Great Recession through the sector’s employment bottom in February and March, 2010.

>In addition, the automotive sector – which led domestic manufacturing’s early recovery rebound from the Great Recession – ended its employment recession in February.

>A 6,200 monthly jobs gain in February plus upward January revisions helped the motor vehicles and parts industries out of a period of net employment decline that had begun in April, 2016.

>Yet manufacturing’s sterling employment performance contrasts strikingly with its still-dismal wage performance.

>Whereas overall private sector wages rose 0.15 percent sequentially in February, manufacturing wages recorded no change.

>Industry’s wage revisions were mixed, with January’s 0.11 percent growth now judged to be 0.22 percent, December’s 0.11 percent advance now pegged at 0.19 percent, but November’s 0.15 percent gain revised to zero.

>The year-on-year manufacturing wage picture is no better. Since last February, industry’s pre-inflation hourly pay is up just 1.67 percent – the slowest such rate since July, 2015’s 1.49 percent.

>Worse, between the previous Februarys, manufacturing wages grew a much faster 2.88 percent.

>Current dollar private sector wages have risen 2.61 percent on an annual basis.

>As a result, since the start of the current economic recovery, in mid-2009, pre-inflation private sector wages are up 25.80 percent more than manufacturing wages. A year ago, the gap was only 21.32 percent.

>Manufacturing’s real wage record lately has been even dimmer in absolute and relative terms.

>The latest data go through January, but that month, inflation-adjusted pay in industry fell 0.37 percent sequentially – a bigger drop than that for the overall private sector (0.28 percent).

>Year-on-year, real wages are up 0.66 percent in the private sector in toto versus a 0.29 percent dip for manufacturing.

>And worse still, although both the private sector and manufacturing are suffering real wage recession, the former’s began only last May – with after-inflation hourly pay down 0.28 percent since then.

>For manufacturing, such pay is down 0.09 percent since January, 2016.

>Further, since the current recovery’s mid-2009 onset, overall real private sector wages have risen more than ten times faster (3.98 percent) than manufacturing wages (0.38 percent).

>Over the longer term, moreover, manufacturing remains a significant jobs laggard. Whereas industry has now regained more than half the jobs it lost during the recession and its aftermath, the overall private sector has more than doubled its recessionary job losses. Since shedding 8.780 million positions on net from December, 2007 through February, 2010, it has created 18.569 million.

>In addition, manufacturing employment is still 8.24 percent below its pre-recession peak of 13.746 million jobs, overall private sector employment has risen 8.43 percent during that period.

(What’s Left of) Our Economy: Another Sign of Wage Stagnation – from the Job Turnover Numbers

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Employment, Great Recession, Jobs, JOLTS, Labor Department, leisure and hospitality, non-farm jobs, professional and business services, recovery, retail, wages, {What's Left of) Our Economy

Since the economy has been moving for quite a while now to full employment (at least as conventionally measured), I haven’t been monitoring the Labor Department’s data on job turnover (the “JOLTS” figures, per the acronym of its official label) as in years past. But yesterday I checked out the numbers reported yesterday morning, and see that this lapse has been shortsighted.

For the JOLTS data are still confirming that the purportedly red-hot, super-tight U.S. labor market is still under-performing according to a key measure – wages. Indeed, the new JOLTS numbers (for November) offer one important explanation: The job openings being advertised by businesses in low-wage industries are outgrowing those in better paying sectors.

The best way to show this trend is to look at the share of total non-farm jobs (the Labor Department’s U.S. employment universe) at key recent points in the business cycle that have been comprised of low-wage jobs, and compare them with the job openings figures at those times.

To remind RealityChek regulars and clue in others, my proxy for low-wage jobs consists of the retail sector, the leisure and hospitality sector, and the big low-wage portion of the professional and business services sector (e.g., janitorial services, landscaping services, call centers, bill-collection services, security services, and the like).

As of November, the hourly wages for these sectors, respectively, were (without adjusting for inflation) $18.28, $15.60, and $20.05. For the private sector as a whole, the hourly wage that month was $26.54.

When the Great Recession broke out, at the end of 2007, these parts of the economy combined represented 26.81 percent of total non-farm employment. When it ended, in the middle of 2009, this share had dropped only to 26.23 percent (by 2.16 percent) – even as overall payrolls dropped by 5.34 percent.

Since then, the low-wage share of all U.S. jobs has risen to 27.74 percent. And the JOLTS data tell the same story – especially during the ongoing recovery.

When the recession began, and low-wage jobs were 26.81 percent of total non-farm employment, they represented 31.94 percent of the job openings advertised by American employers.

During the recession, they were actually in less demand, in absolute and relative terms. In June, 2009, with low-wage jobs accounting for 26.23 percent of the total, such positions represented just 28.38 percent of total job openings. (My figure for the low-wage professional and business services positions is based on their share of jobs in that sector for the month in question. It isn’t broken out in the official JOLTS reports.)   

The results for last November (again, the latest available)? Low-wage jobs had grown as a share of total non-farm employment to 27.74 percent. But as a share of job openings, they had risen much higher – to 34.53 percent.

So because wage lag is still such a prominent feature of the American economy, I’m back on the JOLTS case. When the quality of job opportunities in the labor market starts showing sustained improvement, we’ll have grounds for believing that the long national nightmare of stagnant wages is ending.

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

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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.

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

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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

Tags

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.  

 

(What’s Left of) Our Economy: Manufacturing Ends its Jobs Recession

Tags

inflation-adjusted wages, Jobs, manufacturing, non-farm jobs, real wages, recession, recovery, wages, {What's Left of) Our Economy

Manufacturing ended its technical jobs recession in January, as the sector’s 29,000 employment increase represented the strongest monthly rise in more than a year. Most revisions were positive, but manufacturing’s year-on-year job gains (45,000) in January were still among the lowest in the last three and one half years.

Nonetheless, industry’s share of total non-farm employment rose and is no longer at record low levels, and though still a recovery-era laggard, manufacturing wages showed their most strength since recessionary 2009 – aided in part by the Labor Department’s latest benchmark data revisions. These changes also finally pushed inflation-adjusted manufacturing wages back above their levels at the outset of the current economic recovery.

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

>Manufacturing employment in January continued a recent run of generating good news, as the best monthly net increase in payrolls (29,000) since November, 2014 helped the sector exit its latest jobs recession. Prior to this morning’s release, manufacturing employment had fallen on net for seven straight months – more than the two consecutive negative quarters central to most definitions of GDP recessions.

>Most of the latest manufacturing jobs revisions were positive as well. December’s 8,000 increase was upgraded to 13,000, and November’s previously reported 2,000 improvement now stands at 3,000. October’s last reported 3,000 advance, however, was downgraded to 2,000.

>The better employment numbers also meant that manufacturing jobs are no longer at an historic low as a percentage of total non-farm jobs (the Bureau of Labor Statistics’ employment universe). As of the previous jobs report, this figure stood at 8.61 percent. It has now inched up to 8.62 percent.

>Manufacturing’s January year-on-year jobs performance, however, was less impressive. Industry added 45,000 new positions on net over January, 2015 levels. But this increase was one of the lowest such totals since July, 2013.

> In fact, although it topped December’s upwardly revised 33,000 rise and November’s similarly upgraded 42,000, it was well below October’s 68,000 and September’s 92,000.

>The yearly gap in job creation for January, 2016 was even greater when compared with January, 2014-15 (217,000) and January, 2013-14 (114,000).

>Since manufacturing hit its 2010 employment bottom, the sector has regained 903,000 (39.38 percent) of the 2.293 million jobs it lost during the recession and its aftermath. By contrast, the private sector overall lost 8.801 million jobs from the recession’s December, 2007 onset through its February, 2010 absolute employment low. Since then, it has increased net employment by a shade under 14 million.

>In fact, whereas total private sector employment is now 4.58 percent higher than at the recession’s beginning, manufacturing employment is still 10.11 percent lower.

>The January jobs report featured some of the best manufacturing wage numbers since the recovery began. But comparisons are complicated by the benchmark revisions to earlier data incorporated by the Bureau of Labor Statistics in its newest release.

>Manufacturing wages before adjusting for inflation increased in January by 0.31 percent on month – the fastest rate since August’s 0.63 percent. That gain was also much faster than December’s 0.04 percent (which itself was revised up from a 0.04 percent decrease), and helped produce a year-on-year January manufacturing wage boost of 2.56 percent. In turn, that result would have been the greatest such increase since March, 2014’s 2.53 percent.

>But the unusual (0.16 percent) upward revision in December’s current dollar manufacturing wage level pushed that month’s year-on-year increase to 2.65 percent. That’s manufacturing’s best such performance since October, 2009 (3.03 percent).

> October and November monthly manufacturing wage gains were also upgraded, but these revisions were only about half as great (0.16 percent) as that for December.

>By March, 2010, when manufacturing was in clear expansion mode, those yearly wage gains dropped all the way down to 0.74 percent. It’s an open question whether the latest wage increases will last longer.

>At the same time, even some of manufacturing’s strong recent wage gains trailed those of the private sector as a whole (whose data were also revised in that benchmark exercise). For example, in January, private sector wages before inflation advanced by 0.47 percent sequentially, though that month’s year-on-year improvement of 2.54 percent slightly lagged manufacturing’s.

>Longer term, manufacturing’s wage-laggard status is even clearer. Since the current economic recovery began, in mid-2009, its pre-inflation wages are up less (11.25 percent) than overall private sector wages (14.68 percent).

>Manufacturing’s wages have under-performed after adjusting for inflation as well. The latest Labor Department figures are from December, and showed that in real terms, manufacturing wages were up sequentially by 0.09 percent – the same pace as that of the overall private sector.

>Year-on-year, December real wages were up by 1.90 percent for manufacturing, and by 1.91 percent for the private sector – which also, however, makes clear that manufacturing has been narrowing the gap.

>Since the recovery began in mid-2009, real manufacturing wages are up only 0.09 percent, whereas inflation-adjusted pay in the private sector is up 3.01 percent. But however modest that increase, it means that real manufacturing wages have finally made back all of the losses they experienced during the recovery.

(What’s Left of) Our Economy: Private Sector Employment Increasingly Depends on Public Spending

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defense manufacturing, healthcare, innovation, Jobs, medical equipment, non-farm jobs, pharmaceuticals, private sector, productivity, subsidized private sector, {What's Left of) Our Economy

If you’re a real data geek, you’re giddy over the prospect of a new year not just (or even mainly!) because great parties or possibly new beginnings are on the way. You’re (maybe mainly!) giddy because you’ll soon be getting full-year economic statistics!

This morning, as reported in this morning’s post, we got a big batch – from the Labor Department in the form of its release on the American employment scene for December. The numbers will be revised at least twice more, but they’re a decent marker, and certainly didn’t disappoint in terms of at least one important development I’ve been following – the burgeoning importance of job-creation in parts of the economy that are commonly defined as “private sector,” but that depend heavily on government spending.

As I’ve written repeatedly, drawing this distinction isn’t important because government spending is either good or bad. It’s important because in terms of generating sustainable prosperity, innovation and productivity growth are crucial. The lion’s share of both still comes from the private sector, and ultimately from the market forces that in turn overwhelmingly shape it. If ever more hiring is taking place in parts of the economy (notably healthcare services) reliant on the budgetary decisions of relatively un-innovative, un-productive politicians, America’s economic prospects could be dimmer than widely thought. And that’s precisely one of the main messages being sent by the new jobs report and the January-December figures.

For the record, Labor Department preliminarily estimated that 59,000 net new jobs were created in this subsidized private sector in December. That’s a little over a fifth of all the hiring gains on month attributed to the entire non-farm sector (Labor’s American employment universe), and a slightly larger percentage of increased employment in the private sector as conventionally defined.

But much more revealing are the full-year 2015 numbers and how they compare with those of other recent years. From last January through December, non-farm jobs on net rose by 2.650 million, and employment in the conventional private sector rose by 2.551 million. (Government hiring accounted for the rest.) The subsidized private sector gained 655,000 net new jobs – 24.72 percent of the total new jobs and 25.68 percent of the conventional private sector jobs.

It’s clear that something special is going on in the subsidized private sector just from looking at its share of employment on a stand-still basis. As of December, it accounted for 15.62 percent of all non-farm jobs and 18.45 percent of all conventional private sector jobs – considerably lower than its share of employment gains.

And indeed, the subsidized private sector’s role in total hiring has grown dramatically. In 2014, it generated 15.66 percent of the increase in non-farm employment and 16.04 percent of the improvement in conventionally defined private sector employment. In 2013, those figures were just 13.57 percent and 13.21 percent, respectively. In other words, in terms of total employment advances, the subsidized private sector’s role has jumped by 82.17 percent, and in terms of conventional private sector job-creation, it’s up by 94.40 percent – a near doubling.

As a result, job-creation in that part of the private sector that doesn’t benefit from major government largesse hasn’t been firing on nearly as many cylinders are often portrayed. Rather than creating 96.26 percent of all of 2015’s net new jobs, it was only responsible for 71.55 percent. Moreover, the gap has been widening. In 2014, the “real” private sector accounted for 81.96 percent of overall employment, not the 97.63 percent indicated by the standard classification. In 2013, the Labor Department actually reported that private sector job creation exceeded total job creation because government employment shrank. But more accurately defined, the private sector’s share of new jobs was just 89.11 percent.

And the farther back you go, the more impressive the subsidized private sector’s employment performance looks and the less impressive its market-driven counterpart appears. Since the recovery technically began, in mid-2009, the total non-farm economy has created 12.298 million jobs. If the private sector is conventionally defined, it’s accounted for even more net new jobs: 12.873 million. But strip out the 2.836 million private sector jobs in subsidized industries, and that number falls to 10.037 million – or 81.61 percent of total hiring.

Another way to look at the situation: During the recovery, total non-farm employment is up by 9.39 percent and private sector jobs conventionally defined have grown by 11.88 percent. But without the subsidized private sector’s jobs boom, the private sector increase falls to 11.30 percent. The growth rate of subsidized private sector jobs? Much faster, at 14.52 percent.

And here’s how all these new subsidized private sector jobs have changed the U.S. employment landscape. At the start of the last recession, in December, 2007, this portion of the economy accounted for 13.63 percent of all American non-farm jobs. By the time the recovery began, in June, 2009, its employment share was up to 14.92 percent. And last month, it hit that aforementioned 15.62 percent level.

Conversely, the real private sector stood at 70.19 percent of the non-farm workforce when the recession struck. It share fell to 67.84 percent by the time the recovery began eighteen months later, and at the end of last year, had recovered to only 69.02 percent – below pre-recession levels.

In fact, however, the subsidized private sector’s share of the American employment is surely greater than indicated above. For shouldn’t we include all the employees of the pharmaceutical and medical equipment industries? Along with defense manufacturers? Data for the former aren’t hard to track down but figures for the latter can be pretty elusive – and aren’t officially kept by Washington.

For all the problems associated with a public sector-dominated employment scene, it’s surely better for Americans who can work to hold some kind of job than none. But just as subsidized economic growth is no substitute for the real thing, subsidized employment looks like a poor candidate for delivering the living standards and healthy economy the nation still so urgently needs.

(What’s Left of) Our Economy: U.S. Employment Gains Have Been Heavily Subsidized by Government. Pt I

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Federal Reserve, healthcare services, Jobs, non-farm jobs, private sector, private sector jobs, real private sector, recession, recovery, subsidized private sector, {What's Left of) Our Economy

If you have any doubt that the American economy’s subsidized private sector is driving employment gains lately – at the expense of the real private sector – three new sets of government data should settle the question for you. As a result, they should also make clear that the nation’s employment gains during the current recovery have been much less impressive than economic bulls believe – including a Federal Reserve majority that reportedly is convinced that they justify the first interest rate hike since the financial crisis broke out.

For as I’ve noted repeatedly, that subsidized private sector is made up of parts of the economy like healthcare services, whose size, growth, and employment performance is heavily influenced by government subsidies and other politicians’ decisions. Not that these sectors don’t provide vital services. But because market forces aren’t in their saddles, they’re unlikely to generate the kind of productivity growth and innovation that the “real” private sector produces, and that a truly healthy economy needs.

Let’s start today with last Friday’s monthly jobs report (for November) from the U.S. government. The consensus holds that it was more than good enough to reinforce the Fed’s determination to start modestly tightening monetary policy at its upcoming meeting next week. In addition to total November net job creation remaining above the 200,000 mark, the upward revisions for October and September strongly indicated that an employment weakening that seemed to have emerged in mid-summer was over.

But take away subsidized private sector job creation and the picture doesn’t look nearly so rosy. As it’s conventionally defined by the government, the private sector created 197,000 net new jobs last month. (This figure will be revised twice more in the next two reports.) But 40,000 of those positions (20.30 percent) came in the subsidized private sector. And that percentage was relatively low compared with recent months. In October, it was 23.36 percent. (Next month, this figure will be revised for the final time in 2015.) In September (a final – for now – figure), it was 35.15 percent.

In fact, if we look at the longer term trends, to smooth out those short-term fluctuations, it’s clear that the subsidized private sector has been out-performing the real private sector as a net job creator – and at an ever faster pace.

For the first eleven months of 2013, total non-farm jobs (the government’s U.S. employment universe) grew by 2.279 million and the conventionally defined private sector boosted employment by 2.327 million. (Government jobs decreased.) Of the new non-farm jobs, 14.91 percent came in the subsidized private sector, and these industries comprised 14.62 percent of all new conventionally defined private sector jobs.

For the first eleven months of 2014, overall job-creation was much stronger – 2.787 million. And the conventionally defined private sector added 2.723 million net new positions. But the subsidized private sector’s share of the former increased to 15.57 percent, and of the latter to 15.94 percent.

Now look at what’s happened during the first eleven months of this year. Total non-farm jobs are up by 2.308 million – much less than in 2014. And employment in the conventionally defined private sector improved by only 2.225 million. But the subsidized private sector’s share of the former jumped to 25.82 percent, and of the former to 26.79 percent. In fact, although January-November net job creation in the non-farm economy in 2015 was only 1.27 percent higher than in 2013, and conventional private sector employment growth was 4.38 percent lower, the job creation rate in the subsidized private sector had surged by 75.29 percent.

And here’s a little more perspective: In December, 2007, when the last recession began, the subsidized private sector comprised 13.63 percent of all non-farm jobs (on a stand-still basis), and 16.26 percent of all conventionally defined private sector jobs. By June, 2009, when the current recovery began, these percentages had risen to 14.82 and 18.03. Last month, they stood at 15.61 percent and 18.44 percent.

As previously noted, the above figures define the subsidized private sector as health care services, for-profit educational services, and social assistance services. Others could be added – like medical- and defense-related manufacturing) but they’re not conveniently broken out each month by the Labor Department. So if anything, what we know for sure about the burgeoning employment role of the government-subsidized private sector underestimates its importance. Would the Fed be so certain to raise interest rates with this data in hand?

Next up on RealityChek – what today’s closely watched statistics on job openings are saying about America’s jobs recovery.