(What’s Left of) Our Economy: Private Sector U.S. Jobs Increasingly Really Deserve the Name

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Barack Obama, Employment, healthcare, Jobs, private sector jobs, recession, recovery, subsidized private sector, Trump, {What's Left of) Our Economy

Although unemployment in America has hovered near multi-decade lows for most of the last year, concerns about job quality rightly persist – largely because wage gains have only recently showed signs of recovering to historically normal levels for a recovery. But the latest official data from the Labor Department demonstrate that the makeup of the country’s employment picture and how it’s changed make clear continued improvement in one key measure: Growing private sector employment increasingly reflects gains in what I’ve called the real private sector, as opposed to the subsidized private sector.

Also apparent from the employment figures: The resurgence of the real private sector in relative terms as well as in absolute terms has been a Trump era phenomenon.

As known by RealityChek regulars, this trend is encouraging because the subsidized private sector consists of parts of the economy that are often (and even officially) viewed as parts of the private sector, but whose health depends largely on government largesse. That is, its total employment and its employment gains would be much smaller without huge government payouts – i.e., politicians’ decisions. The healthcare services industry is the main example.

By contrast, the real private sector consists of parts of the economy whose health flows largely from free market forces. So without getting involved in the debate over whether the United States supports too many subsidized private sector jobs or not, it should be clear that they have little to do with the state and health of the economy as a whole – unlike real private sector jobs.

According to the Labor Department’s Bureau of Labor Statistics, from 2013 through 2016, the subsidized private sector’s share of total annual employment increases more than doubled: from 11.34 percent to 25.99 percent. And its share of annual total private sector jobs gains (that is, employment increases by the private sector as conventionally defined), soared from 11.02 percent to 28.59 percent.

During 2017 and 2018 (and the data for late 2018 is still preliminary), the subsidized private sector’s share of total annual U.S. jobs gains dropped to 21.04 percent and then to 19.90 percent. And its share of the growth of total private sector jobs fell to 21.91 percent and then to 20.74 percent.

Another way to look at the Obama-era growth of subsidized private sector employment is to examine its growth as a share of the growth of real private sector jobs. In 2013, this figure stood at 12.38 percent. In 2016? Just over 40 percent. In other words, in the last year of Barack Obama’s presidency, some four in ten of the net new jobs created in the private sector came in the subsidized private sector – meaning that they were heavily dependent on government largesse.

In 2017 and 2018, subsidized private sector jobs growth as a share of total private sector jobs growth sank all the way to 28.05 percent, and then to 26.16 percent.

Looking at the economy from a static standpoint – i.e., through snapshots taken at crucial dates – illustrates these trends, too, although less dramatically. After all, even major relative changes can take many years to show up as major absolute changes in a supertanker as big as the U.S. economy.

At the outset of the last recession the subsidized private sector represented 13.67 percent of all U.S. jobs and the real private sector’s share was 70.16 percent. And the subsidized private sector’s share of the total (conventionally defined) private sector was 19.49 percent.

By the time the recovery began, in mid-2009, these figures stood at 14.97 percent and 67.80 percent – showing that during an economic downturn that decimated the overall American jobs market, subsidized private sector employment rose not only in relative terms but in absolute terms (from 18.92 million to 19.61 million. Meanwhile, the subsidized private sector’s share of the total private sector employment had risen to 22.07 percent.

By January, 2017 – the final month of the Obama administration and eight and a half years into the recovery – the subsidized private sector comprised 15.75 percent of all American jobs, and the real private sector was back up to 68.94 percent. Subsidized private sector employment had grown to 22.84 percent of total private sector jobs.

By December, 2018 (results that are still preliminary) the subsidized private sector’s share of all American employment had kept increasing – to 15.91 percent. And the real private sector’s share grew modestly, too – to 69.11 percent, as did the subsidized private sector’s share of the total private sector (to 23.02 percent).

Nevertheless, this examination of the changing dimensions of subsidized private sector employment also reveals that the national jobs market still hasn’t returned to pre-recession normality. In particular, even though the current recovery is nearing it’s tenth anniversary, that real private sector share of total employment (69.11 percent) is still below where it stood at the downturn’s onset (70.16 percent).

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Following Up: Democrats’ Safety Net-Heavy Policies Still Missing the Mark for Trump Voters

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2016 election, Center for American Progress, Democrats, Economic Policy Institute, Elizabeth Warren, entitlements, Following Up, manufacturing, middle class, Mitt Romney, Neera Tanden, private sector jobs, progressives, safety net, Trade, Trump, Welfare State, working class

A little over a week ago, I wrote that much of the American Left was way off-base in believing that working class Americans who supported Donald Trump’s successful presidential run had voted against their economic interests. My thesis: These Trump voters were (rightly) much more interested in the family wage private sector jobs his campaign was promising rather than the various forms of welfare that Democratic candidates were strongly suggesting were adequate substitutes. And revealingly, compelling confirmation for my claim arrived just this week – in my email box!

The evidence came in the form of fund-raising pitches from the Economic Policy Institute (EPI) and the Center for American Progress CAP). Yes, it’s true that such solicitations aren’t the same as detailed policy papers. It’s also true that both organizations have in the past supported at least some of the trade policy overhauls emphasized by Mr. Trump as vital to job creation in the genuinely productive sectors of the U.S. economy – especially manufacturing. It seems that their interest in new trade policies continues to some extent. And it’s true as well that funding appeals are practically by definition aimed mainly at core or likely supporters – so they don’t necessarily reflect the full output of thinking of these think tanks.

Nevertheless, as a result, fund-raising pitches almost by definition reveal much about these core backers’ priorities, and those of an organization. And in both the EPI and CAP emails, creating more good jobs via trade was a concept conspicuously absent, while what I’ve described as cleverly disguised (even when necessary or desirable) welfare measures were front and center. And here’s a fact that goes far toward clinching the case that the Left remains largely clueless re helping the “ninety-nine percent” it claims to champion. These think tanks in many ways represent the two main wings of progressivism and the Democratic party– what have been called the Bernie Sanders and Hillary Clinton camps.

Take EPI’s pitch – which came in the form of a note from Democratic Senator Elizabeth Warren of Massachusetts. Warren certainly identified a big problem faced by working class voters and bearing much blame for the neglect they obviously feel: “A lot of people in this country work hard, but they aren’t building any security—and they are angry about it.”

Warren continued:

“They’re angry that bonuses go up for CEOs while their own paychecks are stuck in the same place year after year. They’re angry that basic costs like housing, health care, and childcare have skyrocketed. And they’re angry about a tax system that benefits the rich and powerful.

“They’re angry because our economy and our government work for those who have already made it big, but don’t work for them.”

And in my view, she correctly identified a goal that needs to be achieved for greater and more broadly based American economic success: “Our top economic priority must be improving the lives of working people in this country—because everyone in this country should have a fighting chance to build a future.”

But what did Warren emphasize as the policies most needed to help the working (and middle) class? “[F]ighting to raise the minimum wage to a living wage [and expanding] Social Security for millions of Americans…” along with addressing “the gender and race wage gaps….” The words “trade,” “offshoring,” and “globalization” simply don’t appear.

The appeal for the Center for American Progress came from its president, Neera Tanden. You might be familiar with Tanden from the presidential campaign. As a prominent Hillary Clinton supporter, she’s been a fixture on many of the Sunday morning talk shows. She was also one of the most prominent Democrats embarrassed by the hacked and leaked emails of Clinton campaign manager John Podesta.

Tanden’s email yesterday was titled “Defend Our Economic Security” – and therefore seemed full of promise. I thought that it might deal with neglected issues I’ve written profusely about, like the weaknesses that have emerged in the American defense manufacturing base, or the recklessness of permitting the nation’s best tech companies transfer much of their best (and defense-related) knowhow to China.

No such luck, however. Tanden’s focus instead was on “the issues that matter most to working families” – which of course is laudable. But as her letter makes clear, CAP is most concerned with “how the American middle class has been squeezed by the rising costs of health care, child care, higher education, housing, and retirement” and the greatest challenge it sees is preventing President-elect Trump and the incoming Republican-controlled Congress from cutting the government programs that have helped the middle (and working) class cope with these rising costs.

Again, I have no objection to ensuring the continued health of many of these programs, or entire safety net. But in CAP’s apparent view, they’re ends in and of themselves. I also understand the need to demonize political opponents in fund-raising literature. It’s a tried and true way to fire up the donor base.

But the organization doesn’t seem interested in policies to foster the types of private sector jobs that would enable Americans to reduce their burgeoning reliance on these measures. That notion is also difficult to find at the Economic Policy Institute. Both institutes may be right in viewing a safety net-centric economic game plan as a winning political formula. And if they were, in an ironic way, they’d be confirming one of former GOP presidential candidate Mitt Romney’s biggest verbal mis-steps during the 2012 election – his suggestion that 47 percent of Americans are welfare state takers.

But one of the clearest lessons of the 2016 election is that the masses of working class voters who opted for Mr. Trump aren’t buying it. All of which presents the Democrats – who have styled themselves as the Party of the Common Man – with a dilemma that’s not only momentous, but possibly existential.

Following Up: Reexamining Obama’s Private Sector Jobs Legacy

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Following Up, Great Recession, healthcare, Jobs, Labor Department, Obama, private sector jobs, recovery, subsidized private sector, The Economist

This morning, we looked at some pretty glaring omissions in President Obama’s article for The Economist magazine on the state of the U.S. and world economies and their outlooks. But there’s one more that deserves mention, and it should be familiar to RealityChek regulars: his claim that during his watch, the American private sector has created 15 million net new jobs.

As I’ve been writing for years, many of those jobs don’t deserve the label “private sector” at all, because their strength (and therefore much of their ability to hire) depends heavily on government spending, not mainly on the market forces that we’re told are the best guarantors of sustainable prosperity. So I’ve been calling these jobs – which are found mainly in the healthcare industry – “subsidized private sector” jobs. Last Friday’s September U.S. jobs report conveniently enables an update of how big a role they’ve played in the nation’s employment recovery.

A single month’s data is almost never definitive, but the new figures provide a good introduction to the subject. According to the Labor Department, in September, the total American non-farm sector (Labor’s U.S. employment universe) saw its net payrolls rise by 156,000, and private sector jobs conventionally defined increased even more strongly – by 167,000. (The public sector lost 11,000 workers on net.)

If the private sector is defined more realistically, however, and the government-subsidized jobs are stripped out, its employment gains were only 138,000 – because those subsidized industries boosted employment by 29,000.

Although this difference looks pretty big, the subsidized sector actually played a fairly modest role that month in the hiring picture by recent standards. During the first nine months of this year, the subsidized private sector generated 26.36 percent of total 1.601 million net new non-farm jobs created in America, and 28.90 percent of the 1.460 million conventionally defined private sector jobs.

Breaking a recent pattern, the subsidized private sector’s share of total U.S. jobs created from January through September of last year was actually a little higher (26.96 percent). So was the subsidized industries’ share of conventionally defined private sector jobs (28.30 percent). But these figures were both much higher than they were in 2014 – when the subsidized private sector produced 17.03 percent of new total non-farm jobs during its first nine months, and 17.46 percent of employment increase in the conventionally defined private sector. And the numbers were even lower in 2013: 15.03 percent and 14.58 percent.

Another way to look at the subsidized private sector’s burgeoning role is to examine its share of employment on a standstill basis at various key points in recent economic history. Here’s the picture in December, 2007, when the Great Recession began:

 

Conventional private sector share of total non-farm jobs: 83.83%

Subsidized private sector share of total non-farm jobs: 13.63%

Subsidized private sector share of conventional private sector jobs: 16.26%

“Real” private sector share of total non-farms jobs: 70.19%

 

Here’s where matters stood in June, 2009, when the current recovery began:

 

Conventional private sector share of total non-farm jobs: 82.77%

Subsidized private sector share of total non-farm jobs: 14.97%

Subsidized private sector share of conventional private sector jobs: 18.09%

“Real” private sector share of total non-farms jobs: 67.88%

 

And here’s the situation as of last month:

 

Conventional private sector share of total non-farm jobs: 84.68%

Subsidized private sector share of total non-farm jobs: 15.75%

Subsidized private sector share of conventional private sector jobs: 18.60%

“Real” private sector share of total non-farms jobs: 69.05%

 

To me, the big takeaways are that (a) the real private sector share of total non-farm employment is still lower than it was when the recession broke out; (b) the subsidized private sector’s share is nearly five percentage points higher; and (c), the subsidized private sector’s share of the conventional private sector has continued to grow even as the latter’s share of the economy-wide total has expanded because government hiring is still depressed.

Again, Mr. Obama seems to view his major economic legacy as “a more durable, growing economy.” The outsized growth of the government subsidized private sector indicates that his successor might come to feel differently.

(What’s Left of) Our Economy: For Now, Private Sector Job Creation is Over in Real Terms

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Employment, healthcare services, Jobs, JOLTS, private sector jobs, real private sector, subsidized private sector, {What's Left of) Our Economy

Yesterday we got news that raised big questions about the economy in the form of Labor Department statistics showing a major and puzzling surge in manufacturing job openings that clashes violently with just about everything else we know about the sector’s performance. But we shouldn’t forget that last Friday’s choking dog of a jobs report contained a stunner of its own. It showed that, when properly counted, private sector employment actually fell, and that jobs that benefit from immense government subsidies but aren’t placed in the public sector propped up the labor market to the greatest extent in recent years.

As always, the key is recognizing that, although the Labor Department (and most students of the economy) view industries like healthcare services as private sector industries whose performance is determined mainly by market forces, they’re nothing of the kind. They’d be much smaller, and generate many fewer jobs, without gargantuan levels of public spending that enable their customers (practically all Americans) to avoid the lion’s share of their real costs.

And however tempting it may be to view the May employment figures (which are of course preliminary) as outliers that are as misleading as yesterday’s April JOLTS manufacturing results, in fact, they continue a longstanding trend.

Classify the private sector properly by removing those government-subsidized jobs, and you see that, as opposed to rising by (a measly) 25,000 sequentially in May, its employment fell by 42,000 on net. That’s the first such drop since at least the beginning of 2013. (I haven’t had the chance to examine the monthly figures going back further.) Moreover, the revisions to March and April data magnified the subsidized private sector’s role as well.

But the main evidence that the May results aren’t as aberrational as they seem comes from examining the latest year-to-date figures. For the first five months of 2016, they show that the subsidized private sector accounted for just over 35 percent of all net rise in non-farm jobs (the Labor Department’s American employment universe) and 37.48 percent of all the job creation conventionally defined as private sector.

Both such figures are more than ten percentage points higher than they were just one year ago (25.94 percent and 26.25 percent, respectively). Even more striking, the percentages this year are more than double their levels in the first five months of 2013, when the subsidized private sector was creating only 15.87 percent of all net new non-farm jobs, and only 15.35 percent of all conventionally classified private sector jobs.

The burgeoning employment role of the subsidized private sector is just as clear when you look at the economy on a stand-still basis. Here’s the employment picture at the start of the last recession, in December, 2007, which includes statistics for the conventionally defined private sector minus the subsidized private sector (which I call the “real” private sector):

Private sector as share of total non-farm jobs: 83.83%

Subsidized private sector as share of total non-farm jobs: 13.63%

Subsidized private sector as share of conventional private sector jobs: 16.26%

Real private sector as share of total non-farm jobs: 70.19%

Here’s how the labor market looked from this perspective when the current recovery began, in June, 2009:

Private sector as share of total non-farm jobs: 82.77%

Subsidized private sector as share of total non-farm jobs: 14.97%

Subsidized private sector as share of conventional private sector jobs: 18.09%

Real private sector as share of total non-farm jobs: 67.88%

The big takeaway here – the real private sector took it on the chin during the recession while the subsidized private sector flourished, at least in relative terms. And where is the labor market from this standpoint today?

Conventional private sector as share of total jobs: 84.65%

Subsidized private sector as share of total jobs: 15.73%

Subsidized private sector as share of conventional private sector: 18.59%

Real private sector as share of total jobs: 68.91%

These new figures are telling us that, although the conventionally defined private sector has recovered its share of total American employment (and then some), all of these gains have come from a combination of the subsidized private sector’s continued growth plus the continued weakness of hiring in the government sector proper.

So when politicians and pundits claim that, as of the May figures, the U.S. economy has enjoyed 75 straight months of private sector jobs growth, you now know that, by common sense measures, the string has been broken – and that there was much less to the private sector’s previous 74 months than met the eye.

(What’s Left of) Our Economy: U.S. Employment Gains Have Been Heavily Subsidized by Government, Pt 2: Giving a JOLT to Job Openings

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Employment, Federal Reserve, healthcare services, job openings, Jobs, JOLTS, nonfarm jobs, private sector, private sector jobs, subsidized private sector, {What's Left of) Our Economy

Yesterday, RealityChek reported on how the U.S. economy’s subsidized private sector has been dominating total job creation during the current economic recovery. Today, we’ll document another way in which these industries – which are heavily dependent on government subsidies – are playing a similar role when it comes to job openings. That measure of the labor market is especially important, since it’s a part of one of Fed Chairman Janet Yellen’s favorite measure of the health of American employment – the so-called JOLTS report that tracks job openings, layoffs, and turnover.

The JOLTS data for October came out yesterday, and show that total non-farm job openings in the United States two months ago (the American employment universe according to Labor Department statisticians) totaled 5.383 million. That still-preliminary figure is the third highest for the economic recovery, which began in June, 2009.

According to the JOLTS report, the private sector accounted for 90.79 percent of those openings, which seems to indicate that the vast majority of American job-creation for the foreseeable future will be coming in that part of the economy that typically generates most of its productivity growth and innovation, since its performance is largely determined by free market forces.

But as we keep noting, much of America’s so-called private sector is comprised of industries, like health-care services, where levels of consumption, output, and therefore hiring depend heavily on government spending. In October, the JOLTS report revealed that this subsidized portion of the private sector accounted for 19.86 percent of job openings. Consequently, the “real” private sector share was only 70.93 percent.

The difference in just one year has been eye-opening. In October, 2014, the subsidized private sector was responsible for only 17.61 percent of total job openings, and the real private sector generated 73.95 percent.

Last October and this past October, the real private sector performed much better in this regard than at the beginning of the recovery. Then, it accounted for only 64.74 percent of all job openings, and the share of the subsidized private sector was way up at 21.98 percent. Back then, though, the private economy was still wheezing (employment is usually a lagging economic indicator), and health-care services were holding up the entire U.S. labor market.

A better comparison might be with December, 2007 – when the last recession technically began. The economy was already suffering from the bursting of the housing bubble, and consequent Wall Street turmoil. But the real private sector still produced 72.08 percent of all U.S. job openings, and the subsidized private sector share was 17.74 percent.

In other words, government subsidies are responsible for a higher percentage of the American economy’s new employment opportunities today than at the end of the last economic expansion – even though today’s recovery is more than six years old. Moreover, the October-to-October comparisons show that the trend is moving in exactly opposite of the desired direction, in which the real private sector would be increasingly important in the country’s employment picture.

As I’ve repeatedly stated, the subsidized private sector is an essential part of the economy – and it’s hard to imagine how the government could completely or even substantially exit areas like health-care services for the foreseeable future even if the American people wanted this result. (And there’s no indication that they do.) But the subsidized private sector’s historically large, outsized role in not only job-creation but job-opportunity creation seems more like a sign that the U.S. labor market remains badly damaged from the financial crisis and ensuing recession, not that it’s nearly recovered.

(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.