• About

RealityChek

~ So Much Nonsense Out There, So Little Time….

Tag Archives: recoveries

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

05 Sunday Feb 2017

Posted by Alan Tonelson in (What's Left of) Our Economy

≈ 2 Comments

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.  

 

Advertisement

(What’s Left of) Our Economy: Americans are Still Pretty Unproductive

07 Tuesday Jun 2016

Posted by Alan Tonelson in (What's Left of) Our Economy

≈ Leave a comment

Tags

Labor Department, labor productivity multi-factor productivity, living standards, productivity, recoveries, {What's Left of) Our Economy

In her breathlessly awaited speech yesterday in Philadelphia, Federal Reserve Chair Janet Yellen argued that “Over time, productivity growth is the key determinant of improvements in living standards, supporting higher pay for workers without increased costs for employers.”

If, as likely, she’s right, then Americans just got a reminder that they’re still in big trouble in this respect. For the Labor Department just came out with its revised data for productivity growth in the first quarter of this year and for 2015’s fourth quarter, and they were only slightly less awful than the initial report. Manufacturing is stuck in the productivity doldrums, too, but the new statistics also made clear that it remains the economy’s productivity leader – and therefore that the sector’s recent growth and employment stagnation deserve special attention from policymakers.

For the record, these new numbers track labor productivity – one of two measures of efficiency monitored by the Labor Department and economists. This gauge is narrower than its counterpart, multi-factor productivity, because it looks at only one input to production processes – hours on the job by the American workforce. But the labor productivity data always and rightly attract lots of attention because they come out more frequently, and are more up to date, than the multi-factor numbers. Those examine the effects of a wide variety of inputs like capital, energy, and materials.

According to the Labor Department, the nation’s non-farm businesses (the group whose performance is most closely followed) became 0.6 percent less productive sequentially on an annualized basis in the first quarter, and 1.7 percent less productive on quarter in the fourth quarter. The former result was slightly better than the one percent drop previously estimated by the Labor Department, while the latter figure was unchanged.

Year-on-year, labor productivity is now up 0.67 percent. That’s slightly lower than the increase between the first quarters of 2014 and 2016 (0.71 percent). And although this rate is much better than the virtual productivity stagnation of the previous two years, it’s unmistakably poor by historical standards.

By contrast, manufacturing’s sequential annualized labor productivity performance was downgraded by the Labor Department for both the first quarter and the fourth quarter. For the end of last year, it’s now judged to have fallen by 1.2 percent rather than one percent, and for the beginning of this year, its growth has been revised from 1.9 percent to 1.3 percent. But both figures are considerably better than for non-farm businesses as a whole.

Year-on-year, manufacturing productivity has now advanced by 1.32 percent, its best such gain since 2012 (1.68 percent), but also much lower than its historic norm.

An especially informative way to illustrate the U.S. productivity crisis is to compare growth during periods of economic expansion – which yields apples-to-apples data. The statistics for the whole economy go back to 1947, but let’s start with the 1980s expansion, which lasted from the fourth quarter of 1982 through the third quarter of 1990. During that period, labor productivity increased by a total of 17.15 percent.

The 1990s expansion, which began in the second quarter of 1991 and ended in the first quarter of 2001, was somwhat longer, and it saw significantly better total labor productivity performance – a gain of 23.01 percent.

The 2000s expansion was much shorter, running only from the fourth quarter of 2001 through the fourth quarter of 2007. But productivity rose at a similar annual pace, and hit 16.08 percent in toto.

But we have labor productivity data for seven full years of the current expansion, and productivity only improved by 10.09 percent in that stretch.

Nor does there seem to be much cause for productivity optimism in the near future. Unless you’ve heard many 2016 political candidates even talking about this crucial issue?

Following Up: Casino Capitalism is Everywhere But in the Macroeconomic Data

26 Wednesday Aug 2015

Posted by Alan Tonelson in Following Up

≈ Leave a comment

Tags

business investment, casino capitalism, expansions, Financial Crisis, financial deregulation, Following Up, GDP, Great Recession, growth, inflation adjustment, recoveries, stakeholder capitalism, stock buybacks, stock market, Wall Street reform

Over the last year I’ve published an op-ed and a book review that both challenged the widespread claim that the Wall Street deregulation dating from the late-1970s turned American business leaders in general from responsible stakeholders dedicated to creating real wealth for society into shortsighted casino capitalists. My evidence was government data on the macroeconomy showing the contribution to growth made by business investment both before and after that de-regulatory Big Bang. If the claims – most notably made by Democratic presidential contender Hillary Clinton in a ballyhooed speech – are right, I reasoned, then such investment (on factories and labs and warehouses and equipment and the like) should have made a much smaller contribution after the supposed Age of Short-term-ism began than before.

My article found just the opposite, but recently someone in the field whose work I respect expressed some skepticism, and suggested that if I had used different data, I’d get significantly different results. So that’s how I spent some of this afternoon, and just found out that the story remains the same. That is, when you look at the economy, as opposed to anecdotes about corporate greed, there are just no figures that point to a fundamental degeneration in the nature of American capitalism.

My challenger objected mainly to my use of inflation-adjusted data. My rationale was, and still is, that for all the difficulties of accurately measuring price changes, it’s better to use figures that try to distinguish between real economic output and its increase on the one hand, and the impact of rising prices on the other. But the pre-inflation data fails to turn up any noteworthy Big Bang effects, either.

My original article looked at long American expansions since the 1960s, since the 1950s economy was surprisingly choppy, and growth kept getting interrupted, and since comparing expansions (or recessions) is the best way to get apples-to-apples data. This exercise clearly showed that business spending played a smaller role in the post-deregulation 1980s recovery than during the pre-deregulation 1960s expansion (generating 10.75 percent and 9.78 percent of their growth, respectively).

But during the 1990s boom and the bubbly recovery of the previous decade, business spending’s contribution to growth was twice as great – even though business is thought to have become even more obsessed with crackpot financial engineering. And during the current recovery, such investment has been responsible for substantially more than than one quarter of the historically weak real growth that’s been recorded.

Remove the inflation adjustment and the numbers change only modestly – and not nearly enough to even begin supporting the casino capitalism thesis. During the 1960s expansion, business spending generated 13.80 percent of total growth. As with the post-inflation data, this share dropped during the 1980s recovery (to 10.41 percent). But thereafter it rose and stayed much higher than its level in the 1960s – to 17.33 percent during the 1990s expansion, 14.33 percent during the 2000s bubble, and 18.09 percent during the current recovery.

I’ve focused on business investment’s contribution to growth because I wanted data that wouldn’t “penalize” corporations when they were making these spending decisions at times when the economy was faltering for other reasons. Moreover, fueling growth is one of the main reasons we value business spending in the first place. But my challenger wanted to know whether it was correct to argue that business spending as a share of the economy on a static basis peaked in the 1970s – before the financial deregulatory wave was triggered. The answer? Yes, but not even these results show anything like a late-1970s watershed. And that’s even using pre-inflation figures, as I was asked to.

During that decade’s relatively short 1975-1980 recovery from its oil shock-induced miasma, business investment represented 12.92 percent of gross domestic product before factoring in inflation. During the 1980s expansion, that figure dropped off significantly (consistent with the growth contribution figures), to 11.02 percent. But that so-called Reagan boom represented the nadir. During the expansion of the Clinton years – marked by, among other developments, a huge telecommunications- and internet-led technology build-out – the figure bounced back to 12.66 percent.

Business as a share of the economy did fall during the bubble decade, when Wall Street shenanigans were peaking. But the falloff was minimal – to 12.48 percent. It’s been lower during the current recovery – currently averaging 12.12 percent. But that’s still higher than its level during the pre-deregulation 1960s expansion (11.11 percent).

Moreover, it’s crucial to remember that a crash in business investment was one of the main drivers of the Great Recession – when credit seized up all around the world and Armageddon fears were rife. It shouldn’t be any surprise that corporations didn’t reopen the spigots all at once. But reopen them they have, to a great extent. In fact, starting from a low of 11.08 percent of GDP in 2010, this business spending ratio hit 12.88 percent of GDP by 2014, and stood at 12.82 percent during the first half of this year – just marginally below those late-1970s levels. And although it’s true that Wall Street reform efforts have reduced financial engineering possibilities by American financiers, the role played by share buybacks in powering the stock market’s post-recessionary surge makes clear that they’re alive and well elsewhere in U.S. business ranks.

None of this is to say that business spending levels today are adequate, and that (as just mentioned), the financial regulatory regime doesn’t enable too much capital to be expended in too many unproductive ways. But anyone yearning for re-regulation to bring back a golden age of corporate stakeholder capitalism should keep in mind that the business spending data, at least, say that America never had one to begin with.

Blogs I Follow

  • Current Thoughts on Trade
  • Protecting U.S. Workers
  • Marc to Market
  • Alastair Winter
  • Smaulgld
  • Reclaim the American Dream
  • Mickey Kaus
  • David Stockman's Contra Corner
  • Washington Decoded
  • Upon Closer inspection
  • Keep America At Work
  • Sober Look
  • Credit Writedowns
  • GubbmintCheese
  • VoxEU.org: Recent Articles
  • Michael Pettis' CHINA FINANCIAL MARKETS
  • RSS
  • George Magnus

(What’s Left Of) Our Economy

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

Our So-Called Foreign Policy

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

Im-Politic

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

Signs of the Apocalypse

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

The Brighter Side

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

Those Stubborn Facts

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

The Snide World of Sports

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

Guest Posts

  • (What's Left of) Our Economy
  • Following Up
  • Glad I Didn't Say That!
  • Golden Oldies
  • Guest Posts
  • Housekeeping
  • Housekeeping
  • Im-Politic
  • In the News
  • Making News
  • Our So-Called Foreign Policy
  • The Snide World of Sports
  • Those Stubborn Facts
  • Uncategorized

Create a free website or blog at WordPress.com.

Current Thoughts on Trade

Terence P. Stewart

Protecting U.S. Workers

Marc to Market

So Much Nonsense Out There, So Little Time....

Alastair Winter

Chief Economist at Daniel Stewart & Co - Trying to make sense of Global Markets, Macroeconomics & Politics

Smaulgld

Real Estate + Economics + Gold + Silver

Reclaim the American Dream

So Much Nonsense Out There, So Little Time....

Mickey Kaus

Kausfiles

David Stockman's Contra Corner

Washington Decoded

So Much Nonsense Out There, So Little Time....

Upon Closer inspection

Keep America At Work

Sober Look

So Much Nonsense Out There, So Little Time....

Credit Writedowns

Finance, Economics and Markets

GubbmintCheese

So Much Nonsense Out There, So Little Time....

VoxEU.org: Recent Articles

So Much Nonsense Out There, So Little Time....

Michael Pettis' CHINA FINANCIAL MARKETS

RSS

So Much Nonsense Out There, So Little Time....

George Magnus

So Much Nonsense Out There, So Little Time....

Privacy & Cookies: This site uses cookies. By continuing to use this website, you agree to their use.
To find out more, including how to control cookies, see here: Cookie Policy
  • Follow Following
    • RealityChek
    • Join 409 other followers
    • Already have a WordPress.com account? Log in now.
    • RealityChek
    • Customize
    • Follow Following
    • Sign up
    • Log in
    • Report this content
    • View site in Reader
    • Manage subscriptions
    • Collapse this bar