(What’s Left of) Our Economy: The Real Biden Record on Job Creation

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CCP Virus, coronavirus, COVID 19, Employment, healthcare services, Jobs, manufacturing, non-farm jobs, private sector, subsidized private sector, Wuhan virus, {What's Left of) Our Economy

No one can reasonably blame President Biden for running a victory lap right after last Friday’s official U.S. jobs figures (for July) came out. The 528,000 jobs added by employers more than doubled the consensus forecast, and undercut claims that his policies had created both historically torrid inflation and an actual or impending recession. And what U.S. President has ever resisted taking credit for whatever good economic news takes place during his term in office?

But in many key respects, Mr. Biden’s boasting went far overboard. For example, according to the President, “[W]e’re almost to 10 million jobs — almost to 10 million jobs since I took office.  And that’s the fastest job growth in history.”

Except that it’s not. Since he entered office, the overall economy (defined by the Labor Department as the non-farm economy), has indeed seen net employment growth of 9.519 million. But between April, 2020 (the early pandemic era bottom) through January, 2021, total payrolls grew by 12.504 million.

It’s true that the early post-pandemic bounceback was unusually fast, benefiting from a reopening-strengthened rubber band effect from an unusually deep downturn. But it’s also true that the 12-plus million pre-Biden employment boost came over nine months. The Biden-era jobs have been created over 18 months.

Another tall Biden tale: “Since I took office, we’ve created 642,000 American manufacturing jobs in America.  We’ve seen the biggest and the fastest job recovery in American manufacturing history since the ‘50s.”

The 642,000 number is correct. But during that pre-Biden phase of the recovery, employment in industry grew by 761,000. And the rubber band effect was somewhat weaker, since manufacturing lost a smaller share of its workforce during the depths of the pandemic than the rest of the economy.

Some job quality concerns are marring the Biden period record, too. Chiefly, fewer of those new jobs have been truly private sector jobs than during that prior recovery phase, and more have been jobs in government and in areas of the economy that I’ve called the subsidized private sector. These are categories like social services an especially the giant healthcare services sector that are heavily dependent on government funding for their economic performance – including their employment levels.

As I’ve repeatedly noted, many of these public sector and subsidized private sector jobs are vital for any modern economy. But their scale is influenced primarily by politicians’ decisions, not by market forces, and therefore they tell us relatively little about the economy’s real health.

Moreover, if you believe (as you should) that the private sector is more productive than the public sector, and that as a result its performance is the best guarantee of sustainable prosperity, then you want to see the private sector maintain a big lead in job creation over the government and subsidized private sector.

Unfortunately, that lead to date has eroded during the Biden presidency. Specifically, over the nine months of recovery before his inauguration, government (at all levels) plus subsidized private sector jobs accounted for 12.02 percent of the total expansion achieved in non-farm employment. But since then, these sectors have generated 16.92 percent of the total.

And government jobs accounted for all of this increase – and then some. During the pre-Biden recovery, they fell by 116,000. Under his administration, they’ve risen by 494,000.

President Biden is by no means responsible for the relative growth of government and especially subsidized private sector employment. As known by RealityChek regulars, that’s been a long-time trend, at least until the CCP Virus came along. Further, because of the country’s aging population, it could well be an unstoppable trend (unless the healthcare system in particular somehow becomes a lot more efficient). But as mentioned above, one price to date has been a less healthy economy. And how nice it would be if politicians spent more time talking about this tradeoff and how to at least ease it, and less time spinning jobs data so hard that they veer into misinformation.             

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(What’s Left of) Our Economy: A Healthcare Jobs Milestone and Real-er U.S. Private Sector Hiring

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CCP Virus, coronavirus, COVID 19, Employment, healthcare services, Jobs, private sector, subsidized private sector, Wuhan virus, {What's Left of) Our Economy

Here’s the latest example of how completely weird the CCP Virus has made the U.S. economy, and it’s been confirmed by the latest official monthly jobs report (for September): The pandemic and its various knock-on effects have put a real crimp in hiring in the nation’s healthcare sector, which has been an American employment creation superstar literally for decades.

This period has also seen a reversal in the rise of what I’ve called the subsidized private sector (which is dominated employment-wise by the healthcare services industry, and whose employment levels depend largely on politicians’ decisions, not market forces) in the national employment picture at the expense of the remaining “real” private sector. This shift to date has been small but it’s genuinely historic given how quickly it’s emerged, and given the duration and power of the prior subsidized private sector (SPS) surge.

Regarding recent weakness in hiring in healthcare services and its fellow SPS industries (social services and the for-profit educational institutions), the September jobs report was startling enough. Payrolls in this entire complex fell on-month by 7,000 and in healthcare, the dropoff was 17,500.

Want to know how often that happens? Data are available for the whole SPS sector going back to 1939, and the answer is 45 times leaving out the World War II years. And since then, through September, 936 non-World War II months have passed. So we’re talking 4.81 percent of the time.

Not surprisingly, sequential SPS hiring decreases have been even less frequent since government got into civilian healthcare provision in 1966 with the beginning of Medicare and Medicaid coverage. Since then, 657 months have come and gone, and SPS jobs have declined in 26, or 3.96 percent of them.

But here’s the kicker. Of those 26, five have taken place during the pandemic period (in March, April, and December, 2020, and in this January and September – whose results so far are preliminary).

For healthcare employment alone, the official numbers begin only in 1990, but the picture they draw is even starker. Since then, 369 months have passed, and employment in this sector has fallen on month in eight of them – or 2.17 percent of the time. And five of those eight occasions have occurred during the CCP Virus period (March and April, 2020, and this January, June, and September.

Moreover, as indicated above, the pandemic has produced a major change in the role played by the SPS in U.S. job creation. Between the mid-2009 beginning of the economic recovery from the Great Recession that followed the global financial crisis and the last pre-pandemic data month (February, 2020), the SPS’ share of all U.S. jobs rose from 14.97 percent to 16.37 percent, and the SPS’ share of real private sector employment climbed from 22.08 percent to 23.84 percent.

But since then, through September, the SPS share of all U.S. jobs retreated to 16.04 percent, and of “real” private sector jobs to 23.22 percent.

What’s it all mean for the economy? It’s complicated. The downside is that so many of the subsidized private sector jobs, especially in healthcare services, are urgently needed for the nation’s overall well-being and particularly given how its population keeps aging. And it can’t be good news that employment in this industry is still down 3.18 percent since February, 2020, whether because lots of healthcare workers have become burned out from the pandemic, or because they’re leaving the field because of vaccine mandates.

The possible upside of this recent trend is that real private sector jobs in general are more productive than government jobs or SPS jobs (because the latter are more responsive to changes in economic fundamentals rather than government spending levels). Consequently, if their comparative momentum is growing, then so are the nation’s chances for solidly based prosperity, rather than the bubble-ized kind that’s been too abundant lately.

Indeed, just this kind of momentum shift is clear from the data, too. During the pandemic months, SPS employment is off by considerably more (5.21 percent) than real private sector employment (2.69 percent). During the full post-financial crisis recovery, the former jumped by 27.28 percent versus 19.60 percent for the real private sector.

As with all economic forecasts these days, though, it’s impossible to tell whether any of these trends will hold once the pandemic dust settles. What is clear, though, is that more U.S. labor market history is being made nowadays than generally recognized, and it’s by no means entirely devoid of promising potential.   

(What’s Left of) Our Economy: Will Government Keep (Indirectly) Driving U.S. Job Creation?

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Employment, healthcare, Jobs, Labor Department, Occupational Outlook Handbook, private sector, social assistance, subsidized private sector, {What's Left of) Our Economy

Predicting almost anything about the economy ten years or so out is a pretty risky business – which is why I rarely make such forecasts and don’t obsessively follow those made by others. But for many years, I’ve been tracking the growth of what I call the subsidized private sector in the U.S. employment picture. And the U.S. government just came out with a study taking the story out to 2030. So my curiosity was piqued, and because the ever greater importance of such employment speaks volumes about the strengths and weaknesses of the American economy, its workers, and their prospects, I hope yours will be, too.

The big takeaway? According to the U.S. Labor Department’s new Occupational Outlook Handbook, jobs in the healthcare and social assistance sectors will keep rising through the end of the decade as a share of all U.S. jobs – and this shouldn’t be seen as good news.

As I’ve pointed out repeatedly (e.g., here), this isn’t to say that healthcare or social assistance aren’t important for any number of reasons that should be obvious. Economically speaking, however, they’re problematic for two related reasons. First, although they’re technically classified as private sector jobs, their employment levels are largely determined by decisions made by politicians to provide funding, not market forces.

And that funding – or subsidization – is massive. A think tank called the Tax Policy Center pegged federal spending on healthcare alone (by far the biggest industry in the subsidized private sector) at $1.2 trillion in fiscal year 2019. A related research organization, the Urban Institute, reported that state and local governments poured $301 billion into health and hospitals during the previous fiscal year. (That’s the latest such data I could find.) If the state and local figure stayed the same in 2019, this public spending would have added up to just over seven percent of the entire U.S. economy and more than 40 percent of all government outlays that year.

The second reason to be concerned about outsized job growth in this subsidized private sector is that typically, the real private sector is the economy’s main source of innovation and productivity growth, which in turn area major foundations of sustainable prosperity – and therefore of the ability to pay for government in a financially responsible way, as opposed to more and more borrowing. A subsidized private sector punching above its job-creation weight is a sign that the real private sector’s economic role is shrinking in relative terms.

And the Occupational Outlook Handbook says that these trends will continue through 2030. Specifically, whereas other Labor Department data show that subsidized private sector jobs accounted for 16.11 percent of all U.S. non-farm jobs (the Labor Department’s definition of the American employment universe, which includes government jobs at all levels as such) in February, 2020 (just before the CCP Virus pandemic arrived in force), the Handbook‘s figures indicate that this figure will rise to 16.86 percent by the end of the decade.

In addition, subsidized private sector jobs will have climbed from 18.94 percent of all real private sector jobs in February, 2020 to 19.80 percent in 2030.

For some perspective, in June, 2009 (the end of the Great Recession that followed the global financial crisis), the subsidized private sector represented only 14.97 percent of jobs in the non-farm sector and 18.09 percent of those in the real private sector.

Conseqently, it should be no surprise that the Handbook‘s projections indicate that real private sector jobs will have fallen from 68.92 percent of all non-farm jobs in February, 2020 to 68.29 percent.

These shifts may look like small beans. But economies and workforces as massive as America’s don’t change much overnight (unless they’re hit by an outside shock like the pandemic). Also, the Labor Department could be wrong, even if the next few years are relatively tranquil. Yet its predictions track well with recent (pre-CCP Virus) trends.

So even though I haven’t been monitoring subsidized private employment developments during the virus period (because like pretty much all other economic statistics, they’ve been so distorted), I’ll resume checking them periodically again and hoping the trend lines start moving in different directions.

(What’s Left of) Our Economy: Green Shoots of Recovery in New York City?

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(What's Left of) Our Economy, CCP Virus, consumer spending, coronavirus, COVID 19, election 2020, healthcare, Jobs, New York City, restaurants, stimulus package, subsidized private sector, The Partnership for New York City, Wuhan virus

Since I’m a New York City native, I’m a New York City fan. (At least I think that logically follows!) Therefore, one of the most disturbing trends I’ve followed in the CCP Virus era concerns the especially serious troubles the City has suffered this year, economically as well as medically.

I still haven’t made up my mind about whether New York has been pushed by the virus into a period of long-term decline, or whether we’ll see a return to normal once the pandemic has been brought under control (insert your own definition of this goal).

Yet for the last two months, whenever the case for pessimism seems to become conclusive (see, e.g., so much of the evidence in this recent New York Times piece), an email appears in my inbox from a friend who sends me the regular updates on the City’s economy from the Partnership for New York City.

The organization, comprised of hundreds of New York’s most prominent business leaders, says it seeks to “build bridges between the leaders of global industries and government, drawing on the resources and expertise of business to help solve public challenges, create jobs and strengthen neighborhoods throughout the five boroughs.”

Whatever you think of its sincerity or effectiveness or overall objectivity, the data it regularly releases tracks with statistics I monitor from other sources, so it seems reliable to me. And some of the figures it’s presented lately have been major stunners.

For example, as early as late July, the Partnership reported, consumer spending in the City had nearly returned to 2019 levels. In late March, it had plunged to 53 percent below them. Just as unexpected – the big laggards were New York’s wealthiest boroughs, Manhattan and Brooklyn (although maybe the Manhattan results weren’t so surprising, given its dependence on business from office workers, so many of whom weren’t commuting to their offices).

According to a late-September bulletin from the Partnership, not only had New York’s private sector employment increased on month, but “the city has outpaced U.S. private sector job growth for three consecutive months.” The leader here was the healthcare sector – which RealityChek regulars know are only partly private sector jobs, given the industry’s massive dependence on government subsidies. (See, e.g., here.) But the same problem distorts the national figures, so this finding still legitimately counts as a pleasant surprise.

Even more surprising: “209 business licenses were issued in September, up 11% from 189 licenses issued in August. The number of new business licenses has increased for four consecutive months and is up 260% since May.”

Of course, this number of businesses is less-than-tiny for such a gargantuan metropolis. But any signs of entrepreneurship these days are encouraging, and support the even more encouraging possibility that the City remains a powerful magnet for individuals with talent and drive.

No one can doubt that New York still faces massive challenges going forward, especially since the onset of winter, and the growth of lockdown fatigue, means that a second virus wave may hit. Moreover, the colder the weather gets, the greater the struggles of a hugely important restaurant sector that’s been able collectively to hang on with its fingernails thanks to regulatory reforms that helped eateries expand outdoor dining since late spring.

The fiscal situation seems dire as well – unless Democrats sweep to power in next week’s national elections and approve the kind of big aid package for cities and states that Republicans have generally resisted. (The continuing deadlock over a broader relief bill, which could drag on if Republicans retain the White House and/or Senate, obviously could remain a big problem, too.)

Even then, the City will be hard-pressed going forward to fund needed services adequately without the kinds of tax increases that tend to drive taxpayers away, cuts in more controversial outlays that tend to antagonize powerful constituencies like public employee unions, or some combination of both.

For now, however, these Partnership reports have been revealing impressive resilience in the New York City economy. And it bears remembering that, over any significant period of time, so far no one has ever made any serious money betting against it.

Im-Politic: On the Economy, Obama’s Record Looks Stronger than Trump’s

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Barack Obama, CCP Virus, coronavirus, COVID 19, election 2020, Employment to Population Ratio, GDP, gross domestic product, Im-Politic, Jobs, Joe Biden, Labor Force Participation Rate, labor productivity, manufacturing, non-farm jobs, private sector, productivity, real GDP, real private sector, real wages, recession, subsidized private sector, Trump, value added, wages, Wuhan virus

Not surprisingly, as this U.S. presidential cycle gets ever more intense, so has the debate over which boasts a better record in helping steer the nation’s economy: the Obama administration in which Democratic presidential nominee Joe Biden served as second-in-command, or the incumbent Trump administration. I’ve just looked over some key data, and the verdict on most counts goes to the Obama administration. The margin of victory here isn’t huge, but it’s anything but razor thin, either. Moreover, any Obama edge is surprising given that the economy is President Trump’s major advantage in nearly all the polls.

All the same, here are the data. They compare performance during the last three full years of the Obama presidency and the first three full years of the Trump presidency. In my view, these time-frames deserve priority because they’re the ones closest to each other in the same expansionary business cycle, making apples to apples results much likelier.

The time-frames of course leave out the CCP Virus period, during which all the Trump numbers sank like stones. But if you regard the virus’ economic effects as purely artificial, having nothing to do with the economy’s fundamentals (as I do), then you want to strip them out.

Other methodological notes: Although the jobs-focused data come out from the federal government on a monthly basis, and therefore permit comparisons between completely identical (and virus-adjusted) three-year periods, the economic growth and productivity data don’t, so I show Trump results both through the first quarter of this year (affected by the shutdowns that began in March) and through the last quarter of 2019. In addition, regarding the monthly figures, because of the January 20 inauguration date, I peg the end of the Obama administration as January, 2017 and the beginning of the Trump administration as February, 2017.

And off we go, starting with overall employment, which consists of the Bureau of Labor Department’s U.S. employment universe – “non-farm jobs.”

Obama: +5.55 percent            Trump: +4.56 percent

But of course, non-farm jobs include all government jobs, and their status has much less to do with the economy’s underlying strengths and weaknesses than with politicians’ decision. So here are the numbers for private sector jobs.

Obama: +6.56 percent            Trump: +5.04 percent

So advantage Obama again. As RealityChek regulars know, however, not all private sector jobs are created equal. In fact, many barely deserve the term at all, because their circumstances depend so heavily on government spending. Healthcare is of course the leading example. Therefore, it’s useful to examine the employment results in what I’ve called the “real private sector”.

Obama +6.22 percent             Trump: + 4.63 percent

It’s another Obama out-performance. This string is broken when it comes to manufacturing jobs, however.

Obama: +2.38 percent           Trump: +3.78 percent

But Obama comes out ahead on inflation-adjusted wages for the entire private sector.

Obama +3.69 percent           Trump: +2.99 percent

And the margin is even bigger for real manufacturing wages.

Obama: +3.15 percent          Trump: +0.74 percent

One problem with looking at jobs gains or losses, or even the unemployment rate, is that these numbers don’t tell the whole story about the health of the labor market. To fill in the gaps, economists like to examine two performance measures called the Labor Force Participation Rate, and the Employment to Population Ratio.

The former, according to well regarded left-of-center economics think tank, reveals “the number of people in the labor force—defined as the sum of employed and unemployed persons—as a share of the total working-age population, which is the number of civilian, non-institutionalized people, age 16 and over.”

The latter, the same source explains, shows “the number of people currently employed as a share of the total working-age population, which is the number of civilian, non-institutionalized persons, age 16 and over.”

For what it’s worth, this reliable economics and finance website claims that the Employment to Population Ratio provides the best indication of job shrinkage or growth. So let’s begin there.

Obama: 58.8 percent to 59.9 percent       Trump: 59.9 percent to 61.1 percent

Pretty much a standoff.

As for Labor Force Participation:

Obama: 62.9 percent to 62.6 percent       Trump: 62.8 percent to 63.4 percent

Advantage, Mr. Trump.

As previously mentioned, the economic growth figures are only reported quarterly. Keeping that in mind, here’s how the two administrations stack up. The most commonly followed measure of the economy’s size and how it changes is inflation-adjusted gross domestic product (GDP).

Obama: +8.19 percent           Trump: +5.75 percent

These data, though, include shutdown-y March, 2020. Taking the story only through the end of 2019 brings the Trump years’ performance up to 7.11 percent – but he still trails.

Interestingly, even including the first quarter of this CCP Virus-y year, Mr. Trump’s record is slightly better when another metric for economic growth is used – value-added. Its value lies in trying to eliminate the double- and even more overcounting that results when the of the parts and other inputs of a complicated product are counted both when they’re turned out individually, and when they’re contained in that final product.

Obama: +12.09 percent          Trump: +12.24 percent

The Trump presidency’s margin is even bigger in manufacturing value-added, and even including the first quarter:

Obama: +7.09 percent            Trump: +10.58 percent

Importantly, all the above value-added numbers are pre-inflation. After-inflation value-added data are tracked by the federal government, too, but they’re not even measured on a quarterly basis. Only full-year numbers are available. So since these make precise comparisons less possible, I’m skipping them.

Finally, here are numbers that hardly ever make the news, but might be the most important of all – the productivity data. These various measures of efficiency are widely viewed by economists are crucial to determining how healthy and durable economic growth is and will be, and therefore how strongly and for how long living standards can rise.

Results aren’t up-to-date enough for the broadest measure of economic efficiency – multi-factor productivity. But they are for the narrower measure, labor productivity – which gauges how much a single worker can produce in a single hour on the job – starting with the overall economy

Obama: +3.97 percent           Trump: +3.95 percent

And if you want to remove the first quarter of this year, because of the virus effect in March, overall labor productivity during the Trump period was up 4.02 percent

Labor productivity is monitored for manufacturing, too, and here are those statistics including the first quarter of this year:

Obama: -2.57 percent           Trump: +0.29 percent .

Oddly, if the first quarter is removed, the Trump years’ performance worsens a bit – and even falls to an overall dip of 0.09 percent. But however poor, it still tops the record of the Obama years.

So why are the Trump economy poll numbers so good? One possible answer: The final year of the Obama presidency was feeble by nearly all measures. Real gross domestic product advanced by only 1.70 percent. Total employment grew by a mere 1.64 percent, versuss 2.19 percent in 2014. National manufacturing employment actually dipped by 6,000 from 2015 levels. Real wage growth overall slowed from 1.26 percent in 2014 to 0.56 percent in 2016. And inflation-adjusted manufacturing wages performed scarcely better.

Moreover, as the New York Times article linked above makes clear, the public’s evaluations of the Trump economic record are incredibly partisan – often conflicting with a respondent’s actual situation.

It’s also possible and legitimate, as I’ve noted, to point to some important reasons for this Trump under-performance.  The President’s trade policies clearly disrupted national and global supply chains, and the consequent inefficiencies surely dragged on GDP and employment in the short term.  Boeing aircraft’s safety woes have undercut national economic performance lately, too.  But good luck to you if you think these considerations are going to have any effect on voters.  

I’m hardly naive enough to think that these or other economic facts will be enough to determine November’s outcome. And I have no idea how voters will factor in the deep CCP Virus-induced recession into their thinking. But the facts aren’t a throwaway, either, and although the Obama record didn’t exactly thump Mr. Trump’s, it’ll certainly provide Biden with considerable ammunition.

(What’s Left of) Our Economy): The Real Private Sector’s Job Creation is Lagging Again

Tags

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

Although President Trump may not like America’s current healthcare system much, lately it’s been keeping his own economic record in solid shape – not to mention and bolstering his reelection chances. The evidence? Robust employment creation in the nation’s enormous healthcare services sector this year has been almost singlehandedly responsible for keeping job growth in the respectable range, and for strengthening the case that he’s steered the economy ably.

Unfortunately, the big 2019 relative rebound in payrolls in healthcare services and the rest of what I’ve long called the subsidized private sector is less good news for the economy itself. For the huge scale of these positions says much more about the government largesse on which their existence depends than about the state of the nation’s economic fundamentals – the market forces that drive employment in what can be called the economy’s real private sector, and that are supposed to be the keys to long-term national prosperity.

In fact, the figures for 2019 – which now cover its first eleven months – show that whereas the subsidized private sector’s profile in the U.S. labor market had been receding during the first two years of the Trump administration, this year it returned to levels not seen since the early days of the current (record-length) economic recovery. And consequently, the real private sector’s performance has revealed new weakness.

Specifically, from January-through-November 2011 (when the economy settled into normal expansion mode after the typically strong short-term bounceback from an unusually deep recession) through the comparable 2016 period, the subsidized private sector’s share of total gains in “nonfarm employment” (the U.S. Labor Department’s definition of the American jobs universe) grew from 19.35 percent to 25.87 percent. And its share of employment increases in the total, conventionally defined private sector itself, increased from 16.71 percent in 2011 to 36.88 percent in 2016.

By Mr. Trump’s second year in office, healthcare services and other subsidized private sector employment had sunk to 18.96 percent of total nonfarm job creation and 24.55 percent of total private sector job creation.

But what a difference a year has made! For the first eleven months of 2019, fully 30.96 percent of all U.S. jobs created have come in the subsidized private sector, and these industries accounted for more than half (50.75 percent) of private sector job creation. The former figure was the economy’s highest since 2010 (when it hit 32.78 percent), and the latter’s the highest since 2016 (when it hit 58.43 percent).

The Trump record isn’t entirely discouraging if you’re a fan of real private sector job creation – and you should be if you believe (as you should) that the predominance of market forces represents the economy’s best hope for sustainable prosperity. For the pace of public sector hiring has definitely waned over the last three years – and not only in relative terms. During the final three January-through-November periods of the Obama administration, government was adding an annual average of 140,000 jobs. During the first three such periods under Mr. Trump, the annual average is down to 110,000 (though it’s been on the upswing since 2017).

Yet if levels of government spending are the driving forces in both cases, is the relationship between the public sector and the subsidized private sector a distinction without a difference?

(What’s Left of) Our Economy: U.S. Job Quality Takes a Turn for the Worse

Tags

Employment, healthcare services, Jobs, private sector, public sector, recovery, subsidized private sector, {What's Left of) Our Economy

Here’s how bad America’s employment performance has been so far this year. Not only has job creation lagged quantitatively. But by one key measure that RealityChek has followed for years, job quality worsened, too. Specifically, after falling significantly during the first two years of the Trump administration as a share of total hiring, job creation in what I call the subsidized private sector of the economy is up sharply.

To review, the subsidized private sector – dominated by healthcare services – consists of those industries that are typically classified (including by federal government statisticians) as private sector industries, but whose levels of activity (including job creation) are determined largely by politicians’ decisions about levels of government support, not market forces.

This observation doesn’t imply any conclusion that subsidized private sector jobs are merit-less. But it does reflect the understandable and commonly held belief that the genuine private sector is the economy’s main source of productivity growth and innovation, and that therefore it should dominate job creation as well.

The main evidence comes in the form of the figures on the subsidized private sector’s share of total hiring in America, of hiring in the private sector as conventionally defined (which includes the subsidized numbers), and of hiring in the “real private sector” (the total resulting from subtracting the subsidized private sector from the conventionally defined private sector figures). And since we only have data for the first six months of this year (including those for June, which are still preliminary), the time frames compared here will consist of the first six months of each year since the June, 2009 beginning of the current economic recovery).

During the first six months on Mr. Trump’s watch, net new subsidized private sector job creation accounted for 22.29 percent of total job creation (“non-farm” hiring, as the Bureau of Labor Statistics – BLS – defines it), for 23.41 percent of such hiring in the conventionally defined private sector, and of 30.57 percent of the net new jobs in the “real private sector.”

During the first six months of 2018, these shares all declined – to 18.85 percent, 19.75 percent, and 24.61 percent, respectively. At least as important, they were among the lowest recorded during the current recovery. In particular, they were all lower than they were during the first six months of President Obama’s last year in office – when they reached 28.57 percent, 31.57 percent, and 46.13 percent. That is, from January through June of 2016, the increase in subsidized private sector payrolls was nearly half as large as all net new hiring in the rest of the private sector (the “real private sector”) – which is much larger.

But during the first six months of this year, the subsidized private sector made a tremendous comeback.

These industries’ share of total net new U.S. hiring jumped from 18.85 percent to 30.88 percent. Its share of conventionally defined private sector hiring rose from 19.75 percent to 33.06 percent. And net payroll increases in the subsidized private sector compared with “real private sector” payroll increases more than doubled – from 24.61 percent to 49.38 percent.

Even worse, all three results were the highest registered during the current recovery.

The only (mildly encouraging) news on the job quality front in this respect (accepting my assumption that relatively weak job creation in the “real private sector” is a troubling development): On a standstill basis (representing a snapshot, not measuring rate of change), the combined share of total hiring accounted for by the subsidized private sector and the public sector keeps falling. But that’s clearly because job creation in the public sector proper remains weak.

At the onset of the last recession – at the end of 2007 – these jobs amounted to 29.84 percent of all U.S. jobs tracked by the BLS. When the recovery began, this figure had increased to 32.20 percent. By last June, it has dipped to 30.94 percent. And as of this past June (again, preliminarily), it was down to 30.87 percent. That’s still higher than when the last recession began, so it’s possible to argue that the American labor market still hasn’t fully normalized. If the subsidized private sector’s recent job creation resurgence isn’t interrupted, such normalization will become an ever more distant goal.

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

Tags

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).

(What’s Left of) Our Economy: U.S. Private Sector Job Creation is Still Overstated, but its Comeback Continues

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government, health care services, Jobs, private sector, recovery, subsidized private sector, {What's Left of) Our Economy

Since we get a breather till the last week of the month in the flow of major nation-wide U.S. economic data, why not revisit one of my favorite unofficial measures of the American economy’s health? That’s the share of job creation that’s accounted for by what I call the subsidized private sector – those parts of the economy – notably healthcare services – that are officially classified as private sector industries, but that don’t really deserve the label because they depend so heavily (including for employment levels) on massive government subsidies.

This distinction matters, or should matter, because nearly all Americans rightly believe that the private sector, not the government, is the economy’s best hope for productive, sustainable growth. In turn, genuine private sector job creation is a much better gauge of the economy’s health than private sector job creation whose numbers are inflated by including the subsidized industries’ performance.

So I’m glad to report that the results for the first three-quarters of this year (through September) show the continuation of a trend I’d spotted a while ago: The subsidized private sector’s share of new total jobs and new private sector jobs is considerably lower so far during the Trump years than during Barack Obama’s presidency. At the same time, the subsidized private sector is still punching above its weight in terms of job creation, which isn’t such good news.

Let’s start, as usual, with 2013, since it was a year by which time the current economic recovery (which began in mid-2009) was well established. Conveniently, it also permits examining progress over a five-year period.

Between January and September, 2013, the subsidized private sector generated 11.14 percent of the economy’s total net new jobs created, and 10.83 percent of all the such jobs credited to the private sector as conventionally defined. The “real private sector,” meanwhile, produced fully 91.79 percent of the economy’s new hires, and 89.17 percent of the employment improvement placed in the conventional private sector category. (A drop in government employment accounts for the failure of these percentages to add up to 100.)

But what a change by 2016 – the last year of the Obama administration. During the first nine months of that year, the subsidized private sector’s share of total payroll increases had more than doubled – to 23.04 percent. And its share of all the conventional private sector jobs added during this period rose even faster – to 27.92 percent. Largely as a result, the real private sector accounted for only 59.43 percent of all net new U.S. employment. And the real private sector’s share of job gains credited to the conventionally defined private sector dropped to 72.06 percent.

So far this year, the subsidized private sector’s share of all U.S. job creation is down to 19.73 percent. The real private sector share of this total bounced all the way back to 76.27 percent, and its share of conventional private sector job gains was up to 79.44 percent.

But between 2017 and 2018, progress along these lines was much slower than during the previous year. In fact, when examined on a stand-still basis (different from the dynamic basis represented by the above employment change numbers), the subsidized private sector’s share of total U.S. employment actually has edged up over the last year – from 15.85 percent to 15.89 percent, and these industries’ share of conventionally defined private sector employment remained at 18.69 percent. 

With the subsidized private sector’s share of total job-creation this year nearly four percentage points higher (the 19.73 percent referred to in the previous paragraph), it’s clear that these industries keep creating an outsized share of overall new U.S. hiring.   

As always, please remember that I’m not portraying the subsidized private sector as worthless or only marginally important. Of course we need healthcare services in particular, and as the American population continues to age, we’ll continue to need a lot more. All I’m saying is that the nation needs to define its terms properly, and recognize that, without immense government spending (and the consequently greater debts), many of the jobs we’ve come to consider private sector jobs simply wouldn’t exist.

(What’s Left of) Our Economy: The Real Private Sector Keeps Regaining its Job Creation Mojo

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

Although economic cycles don’t care about human calendars, humans do. So with last Friday’s release of the preliminary U.S. jobs figures for June, at the mid-year point, it’s as good a time as any to update RealityChek‘s monitoring of one of my favorite trends: The extent to which private job creation in America is actually job creation in government-subsidized sectors, notably health care services – which belong in a separate category because their overall growth and therefore employment levels depend so heavily on political leaders’ largesse, not only market forces.

When I last checked (in a February post that examined the full-year 2017 data), the news looked pretty good. After rising strongly during the Obama administration, the subsidized private sector’s share of total employment growth fell notably during the Trump administration’s first year in office. That’s encouraging not because subsidized private sector jobs aren’t needed, but because unless everything known or believed about economics is wrong, those jobs are bound to be less productive than jobs in the “real” private sector.

The June jobs statistics show that this positive development remains intact.

To generate the best (apples-to-apples) numbers, let’s compare the relevant numbers for the first six months of each of the last five years.

In 2013, the subsidized private sector generated 11.20 percent of the net new employment gains achieved by the economy between January and June. This figure rose every year through 2016, when it reached 28.95 percent.

During the first six months of 2017, however, the subsidized private sector’s share of total job growth fell to 23.25 percent. And though June, it’s down to 18.88 percent so far in 2018.

Just as important, the prominence of real private sector job creation is up considerably during this period. This development becomes clear when comparing employment growth in these two private sectors.

For the first six months of 2013, subsidized private sector job growth (135,000) represented 10.78 percent of conventionally defined private sector job growth (1.252 million). By 2016, its share had nearly tripled – to 31.47 percent (315,000 out of 1.001 million overall private sector jobs created.

But between January and June, 2017, the subsidized private sector accounted for only 23.64 percent of the overall private sector’s job growth, and the comparable number for this year has fallen to 19.03 percent (243,000 out of 1.277 million conventionally defined private sector jobs). That’s still nearly twice as high as in 2013, but two straight years of decline portends well for the economy, all else equal.

The American employment scene is hardly devoid of major problems – notably wages whose growth has been sluggish before accounting for inflation and that have been falling when adjusted for price increases. Moreover, with the U.S. population continuing to age, healthcare services in particular are inevitably going to remain a major source of employment for the foreseeable future. Still, signs that hiring momentum is swinging back to the real private sector shouldn’t be minimized. Maybe they’re even worth a presidential tweet.