(What’s Left of) Our Economy: Where the Trump Record is Looking Different

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Barack Obama, Bureau of Labor Statitics, Employment, Great Recession, healthcare, Jobs, Mainstream Media, private sector, real private sector, recovery, subsidized private sector, Trump, {What's Left of) Our Economy

Since of course there’s no Mainstream Media bubble or echo chamber, it must be a total coincidence that the press last week was filled with articles noting that the U.S. economy today (which President Trump keeps praising) looks pretty similar to the U.S. economy before the last presidential election (which candidate Trump decried).

Generally speaking, these observations are right – with one important exception that’s been universally overlooked: Job creation this year so far has owed significantly more to the “real private sector” of the American economy and less to the “subsidized private sector.” That is, more hiring is coming in the part of the economy in which employment levels generally reflect free market forces, and therefore speak volumes about the whole economy’s fundamentals. And less hiring is taking place in industries like healthcare services, where job creation largely reflects levels of government support that stems from political decisions. Therefore, however worthy their services, employment performance in these sectors says little about the state of the economy.

RealityChek observed the possible start of this trend two months ago. Now that we’re halfway through the year, it looks more solidly established. As usual, the best evidence comes from comparing job creation in the first six months of this year with job creation during the same periods in past years. (Keep in mind, however, that the statistics for May and June, 2017, are still preliminary; that is, they’ll be revised in the next two months – and then revised again early next year along with the results for all of 2017. For good measure, the Bureau of Labor Statistics will recalculate them again further down the road.)

For the first six months of this year, total U.S. net employment gains (in the “non-farm” sector that represents the Bureau of Labor Statistics’ American employment universe) came to 1.079 million. Of these, 20.95 percent came in the subsidized private sector, and 74.05 percent came in the real private sector. (The rest came in government at all levels.)

Those figures are much different than those for the first six months of 2016 – 28.44 percent and 60.83 percent. In fact, the January-June 2017 results represent the first time since 2014 when the subsidized private sector share of total job creation fell and the real private sector share rose. At the same time, the subsidized private sector’s role in total hiring is way up from January-June, 2013 – when it was only 14.22 percent. And the real private sector’s role is way down (from 92.63 percent that year).

Another way to look at hiring developments: During the first half of 2013, subsidized private sector job creation totaled 13.31 percent of job creation in the private sector as it’s conventionally defined (that is, including the subsidized industries). By the first half of 2016, the subsidized industries’ share of conventionally defined private sector net new employment had more than doubled: to 31.86 percent.

Finally, let’s see how these employment numbers have changed on a stand-still basis.

In December, 2007 – on the eve of the Great Recession – the subsidized private sector accounted for 13.22 percent of all non-farm jobs, the share of the private sector conventionally defined was 83.83 percent, and that of the real private sector was 70.62 percent.

In June, 2009 – when the recovery began – these figures were: subsidized private sector, 14.97 percent; conventional private sector, 82.77 percent; and real private sector, 67.80 percent.

And this June? Subsidized private sector, 15.78 percent; conventional private sector, 84.73 percent; and real private sector, 68.96 percent.

In other words, although the punch has slacked off a bit, the subsidized private sector is still punching above its weight when it comes to job creation. We know this because its share of new hiring for the first six months of this year (20.95 percent) remained greater than its share of total American employment as it stood in June (15.78 percent). The real private sector is outperforming, too, but the gap is much smaller proportionately.  (The – big – slacker has been the public sector.)

Also, eight years into the current economic recovery, the real private sector’s share of total American jobs is smaller, and the subsidized private sector’s share is larger, than they were at the start of the expansion.

There’s no doubt that the American job market today is in much better shape than it was at the start of the recovery – and that most of this progress took place before President Trump took office. Nor is there much reason to doubt that until the economy’s reliance on the subsidized private sector for job creation falls considerably more, it will difficult to claim legitimately that the employment scars of the recession have fully healed. But something else that’s now increasingly clear is that a crucial job quality front, the Trump economy is looking notably different – and better.    

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

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CNN.com, Employment, healthcare services, Jobs, Labor Department, non-farm jobs, private sector, real private sector, recession, recovery, subsidized private sector, The New York Times, {What's Left of) Our Economy

The Snob’s Manual tells us (often correctly) that you know when the stock market’s peaked when the retail investor rushes in, and that you know when a fad is passe when the mainstream media report it. Could the same maxim be on target for economic trends, like the outsized role played by the U.S. subsidized private sector in job creation during the recovery? I’m not sure yet, but the last few sets of monthly American employment data (including last Friday’s April figures) are certainly food for thought.

As RealityChek regulars know, I’ve been spotlighting this trend since well before RealityChek was born. And it was great to see the theme picked up last month by a major reporter who covers the healthcare sector (the core of that part of the economy dubbed private sector but in fact heavily dependent on government spending). Since then, healthcare hiring’s unusual recent robustness has been covered by The New York Times and CNN.com.

Here’s the rub: So far this year, subsidized private sector job creation has become less important in the overall employment picture, not more. The March and April statistics are still preliminary, but since January, the pace of subsidized private sector hiring has ranged between 7.87 percent of total monthly job creation (in January) to 29.31 percent (in February). The April figure was right in the middle: 19.43 percent.

The subsidized private sector’s waning momentum – at least relatively speaking – comes through more clearly when the first four months of this year are compared with their last few counterparts. From January through April, 2017, subsidized private sector net new job creation (which also includes social assistance agencies and the for-profit education sector) represented 18.43 percent of the non-farm total (the Labor Department’s definition of the American employment universe.

That share is considerably higher than the figure for the first two months of 2013 and 2014 (14.56 percent and 12.53 percent, respectively). But it’s also considerably lower than the 27.68 percent for 2015 and the 23.87 percent for the same time span in 2016. In addition, these numbers show that the subsidized private sector’s importance has not fallen for two straight years.

That’s not to say that the subsidized private sector isn’t still punching above its weight. Its 19.43 percent of net new job creation was still greater than its share of total employment on a standstill basis (15.75 percent). It’s also still higher than the share at the mid-2009 onset of the current recovery (14.97 percent). And it’s much higher than the share at the start of the last recession at the end of 2007 (13.22 percent). But there’s no doubt that this year it’s not punching quite as hard.

The flip side of the equation tells a similar, but not identical, story. The “real private sector” – where job creation is determined largely by market forces, not government decisions – stood at 68.95 percent of total non-farm jobs last month. That’s actually a little higher than its share at the start of the recovery (67.80 percent). But it’s also still a little lower than its share at the start of the last recession – more than nine years ago (70.62 percent).

There’s still a long way to go in figuring out whether these early 2017 results will hold up even through the end of this year, much less whether they represent hiring that’s peaking (again, relatively speaking) in the subsidized private sector. And of course a huge question mark is hanging over this entire chunk of the economy in the form of the healthcare debate. But the real implications are unchanged. Although subsidized private sector jobs serve many valuable purposes, the more the economy leans on them to generate employment and incomes, the less dynamic and productive the nation is bound to be.

Following Up: Healthcare’s Outsized Job Creation Reported in The New York Times

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Affordable Care Act, Chad Terhune, Employment, Following Up, healthcare, healthcare services, Jobs, Obamacare, private sector, productivity, subsidized private sector, The New York Times, Trump

Well this is pretty cool! A new New York Times op-ed piece has spotlighted a trend that RealityChek has long covered: how strongly the creation of healthcare services employment has dominated recent American job creation, and how this trend has been especially noteworthy since the financial crisis and Great Recession broke out nearly a decade ago.

At the same time, author Chad Terhune, who reports on the healthcare industry for Kaiser Health News and the California Health Care Foundation, explains a major dilemma being created by outsized healthcare job creation for the Trump administration: Because so many of the new jobs in the sector have been driven by the build-out of Obamacare, the president’ promise to abolish this vast new structure could endanger his broader promise to jump-start feeble U.S. economic growth and stagnating incomes.

Even worse, according to Terhune, any effort to make healthcare more affordable, or even keep it at its current affordability levels, will significantly weaken the healthcare job-creation engine.

As the author sees it, healthcare hiring got a major boost “as coverage expanded in 2014 under the [Affordable Care Act] and new federal dollars flowed in. The law gave hospitals, universities and companies even more reason to invest in new facilities and staff. Training programs sprang up to fill the growing job pool. Cities welcomed the development — and the revenue.”

Sharpening the healthcare jobs conundrum faced by the president: “rising health spending has been good for some economically distressed parts of the country, many of which voted for Mr. Trump last year.” And Terhune cites specific examples from West Virginia to Pennsylvania to Ohio and Missouri.

Just as important, the author convincingly shows that American healthcare’s success in creating employment – which clearly predates Obamacare’s passage – also largely explains its inefficiency. In Terhune’s words, because of the system’s

“redundancy, inefficiency and a growing number of jobs far removed from patient care….[l]abor accounts for more than half of the $3.4 trillion spent on American health care, and medical professionals like health aides and nurse practitioners are in high demand. But the sheer complexity of the system has also spawned jobs for legions of data-entry clerks, revenue-cycle analysts and medical billing coders who must decipher arcane rules to mine money from human ills.”

And although Terhune doesn’t make the point explicitly, this labor-intensivity means that the sector of the economy fueling so much of its output and hiring is pathetically unproductive. In other words, the more outsized growth and employment healthcare creates, the less able the entire economy will be to raise living standards on a sustainable basis.

Moreover, one big reason for this low productivity is a feature of the healthcare system – both under Obamacare and before it – not mentioned by Terhune, either, but that’s vital to recognize: As I’ve observed, although this gigantic industry is officially (and no doubt popularly) considered a part of the private sector, its scale owes largely to subsidies from the public sector, which is renowned for low productivity.

As always, RealityChek readers – and others – need to understand that placing healthcare (and similar industries, like the for-profit educational system and social assistance agencies) outside the “real private sector” is not the same as questioning its fundamental value. After all, no truly civilized society would ever reduce public policy to a quest for productivity to the exclusion of all other goals, whether economic or non-economic. Moreover, as some readers have alertly pointed out, the steady aging of the American population is bound to mean continued healthcare sector growth.

But Terhune’s article is a badly needed reminder that the economy’s heavy reliance on the current healthcare system’s employment power has major downsides. As its title indicates, it’s a “costly addiction,” and its price is bound to rise without a major overhaul of some kind.

(What’s Left of) Our Economy: Murky Jobs Signals from the New JOLTS Report

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BLS, Bureau of Labor Statistics, Federal Reserve, healthcare services, Janet Yellen, Jobs, JOLTS, recovery, subsidized private sector, turnover, {What's Left of) Our Economy

Economy-watchers just got another reminder today of how difficult it remains to figure out how healthy the current recovery is – from the data on employment turnover released by the Labor Department’s Bureau of Labor Statistics (BLS). The biggest surprise they delivered concerned the numbers of job openings reported (preliminarily) for February in the economy’s subsidized private sector.

Whereas the last few months of BLS data indicate that hiring in industries like healthcare services (which are heavily dependent on government support) hasn’t been quite so outsized as over the last decade, the new job turnover numbers (commonly known by their acronym JOLTS) suggest that they’re still punching above their weight.

If you think – as you should – that the real private sector should flat-out dominate job creation because it’s the economy’s leader in productivity and innovation, that’s not such a great development.

For the first three months of this year, the subsidized private sector accounted for 18.57 percent of the 533,000 total net new jobs America created. During the first three months of last year, this figure was 21.26 percent. These numbers will be revised several times more, but so far they signal that subsidized private sector jobs gains have lost some of their relative steam. (For more on the robust hiring in these industries during the current recovery, see this recent post.)

But the job turnover data appear to be sending the opposite message. Here we only have statistics going through February, and they’ll be revised down the road, too. But for the first two months of this year, 19.38 percent of the 11.368 million total job openings have come in the subsidized private sector. For the first two months of 2016, that figure was only 17.76 percent. In fact, the 1.138 million job openings estimated in the subsidized in February were the highest monthly total ever in absolute terms. (This data series started in 2000.)

To be sure, the subsidized private sector’s share of total job openings this year is a little below the levels that have held for most of the recovery. (See this post for more detail.) But its year-on-year rise is tough to square with the relative decline in actual job creation.

Another noteworthy result found in today’s job turnover report: The decline of retail job opportunities comes through plain as day. It’s not that the sector, whose bricks-and-mortars segment is under such tremendous pressure from on-line shopping, isn’t reporting any job openings at all. In fact, at 541,000 in February (on a preliminary basis), they were on the low end but still respectable by the standards of the last few years.

Look at the year-on-yer change, however, and you can see the retail employment problem. Reported job openings during January and February combined were down nearly ten percent. Those kinds of drops haven’t been seen since early in the recovery, in 2010.

These employment-related developments stand in especially stark contrast to the Federal Reserve’s apparent conclusion that the economy is just about fully recovered, and that the central bank’s new priority is sustaining “what we have achieved,” as chair Janet Yellen declared yesterday. This approach of course entails continuing to raise interest rates gradually, and reducing the immense amount of bonds the Fed bought as part of its stimulus program. Here’s hoping that the Fed’s confidence more accurately reflects the true state of the economy than these latest figures.

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

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Bureau of Labor Statistics, Employment, healthcare services, Jobs, non-farm jobs, real private sector, recession, recovery, subsidized private sector, {What's Left of) Our Economy

I have no idea how much credit President Trump deserves for the February U.S. jobs figures released last Friday that nearly everyone hailed as a strong performance. I feel somewhat more confident in noting that the results provided some preliminary indications – regardless of who or what deserves credit – that one of the most troubling features of the current employment recovery may have peaked.

Specifically, the February numbers show a reversal of the economy’s burgeoning reliance on what I call the subsidized private sector to generate employment gains, and a revival of the role played by the real private sector. That’s great news if these developments continue.

To summarize, the subsidized private sector consists of those American industries classified officially as private sector industries, but where levels of demand – and therefore employment – depend heavily on government subsidies. Healthcare services is the leading example. The real private sector is hardly devoid of government influence. But its levels of demand and employment are largely shaped by free market forces.

And since the real private sector leads the economy in innovation and productivity, signs that it’s regaining its relative job-creation chops deserve cheers.

I called the encouraging signs preliminary because they only cover the first two data months of this year. But they reveal that, in January and February, the subsidized private sector created only 17.55 percent of the 473,000 total net new jobs created by the economy. (Both numbers will be revised several times more.) That’s a much smaller share than the subsidized industries generated last January and February: 24.79 percent of the 363,000 net gain in employment.

The same conclusions flow from another set of data. During the first two data months of this year, the subsidized private sector accounted for 18.53 percent of the total employment improvement of the private sector as it’s conventionally defined by the Bureau of Labor Statistics. During the first two months of last year, that figure was 27.19 percent.

At the same time, the subsidized industries clearly are still punching above their weight on the employment front. In 2013, their two-month share of all net new jobs was only 13.48 percent, and of conventionally defined private sector jobs, 13.59 percent.

Looking at the economy on a standstill basis also reveals the importance of subsidized private sector job-creation. When the last recession began, at the end of 2007, it represented 13.22 percent of all non-farm payrolls (the Bureau of Labor Statistics’ U.S. jobs universe). When the current recovery began, in the middle of 2009, the subsidized private sector share had grown to 14.97 percent. And as of last month, despite the developments noted above, this percentage was up to 15.74 percent.

And this subsidized private sector growth has come in part at the expense of the real private sector. It’s share of total U.S. employment as of last month (68.94 percent) is still higher than at the recovery’s onset (67.80 percent). But it’s lower than its level at the onset of the last recession (70.62 percent).

Viewed from another perspective, when the current recovery began, as mentioned above, the subsidized private sector represented 14.97 percent of total American jobs. But since that time, it’s been responsible for 22.60 percent of total employment growth. The real private sector at the beginning of the current recovery accounted for 67.80 percent of total American jobs. And it’s share of subsequent employment growth has been higher, too (79.10 percent). But the gap between its share of employment and its role in employment growth is much lower than that of the subsidized industries.

Finally, the new jobs report contained some good news for fans of former President Obama. It revealed that from the start of the recovery that began a few months into his first term in office, through the end of his administration, hiring was slightly less subsidized private sector-heavy than originally reported.

There’s no doubt that two months’ worth of data per se hardly signal the dawn of a new, brighter era in American employment. At the same time, most trends don’t last forever. So in the months ahead, these subsidized private sector job trends will deserve more attention than ever. Indeed, they’ll be at least as important a yardstick for judging the Trump administration’s economic performance as the overall jobs totals.

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

Tags

Bill Clinton, Employment, George W. Bush, healthcare services, Jobs, Labor Department, non-farm jobs, Obama, private sector, recoveries, subsidized private sector, {What's Left of) Our Economy

Because the latest monthly U.S. jobs figures that were released last Friday incorporated revisions going back to last March, our picture is clearer than ever of how dependent former President Obama’s job-creation record was on employment gains in what I call the economy’s subsidized private sector. Those are industries, notably healthcare service, where levels of demand (and therefore employment) are heavily reliant on government subsidies (and therefore politicians’ decisions) instead of on market forces.*

And unless you believe that government or parts of the economy it largely underwrites should be America’s job-creation leaders – which you shouldn’t – you’ll recognize that the more prominent that subsidized private sector is in the nation’s employment picture, the weaker the job market’s dynamics, and the U.S. economy’s genuine strength.

The verdict? These subsidized industries played a large, growing role in U.S. employment gains achieved during the economic expansion that began in June of Mr. Obama’s first year in office. At the same time, although the economy under Mr. Obama performed much better in this crucial respect than under his predecessor, George W. Bush, it fell short of the job-creation pattern under Mr. Bush’s predecessor, Bill Clinton.

The easiest way to show these trends is to focus on the share of total non-farm employment (the American jobs universe according to the U.S. Department of Labor, which officially tallies these numbers) accounted for by the subsidized private sector on a stand-still basis and the share of total job gains it represents. That methodology also yields the data on how employment in what might be called the “real private sector” is faring. And here are the numbers for the last administration:

 
Non-farm job change: +14.534m Percentage change: +11.09

Private sector job change: +14.833m Percentage change: +13.68

Subsidized private sector job change: +3.276m Percentage change: +16.70

Real private sector job change +11.557m Percentage change: +13.01

 

The following numbers show how strongly the subsidized private sector has influenced overall job creation under Mr. Obama:

 
Share of total non-farm job gains: 22.54 percent

Share of conventionally defined private sector job gains: 22.09 percent

 
As a result, the real private sector accounted for 80.51 percent of total non-farm job gains – a high but much smaller share than that resulting from failing to strip out the subsidized jobs (102.06 percent – the discrepancy comes from the absolute reduction in government jobs under President Obama).

Moreover, the subsidized private sector’s importance grew impressively during the Obama years. Between 2015 and 2016, it produced 24.44 percent of all non-farm jobs generated and 26.68 percent of all the employment improvement in the private sector as conventionally defined.

Nevertheless, if the subsidized private sector’s employment role grew robustly under President Obama, it positively skyrocketed during the Bush recovery of the 2000s compared with the rest of the economy. Let’s start by examining the job increases in the relevant major sectors of the economy from the end of 2001 to the end of 2007 – an expansion much shorter than that which began under President Obama:

 
Non-farm job change: +7.139m Percentage change +5.45

Private sector job change: +6.388m Percentage change +5.83

Subsidized private sector job change: +2.827m Percentage change +17.56

Real private sector job change +4.191m Percentage change +4.48

 
The contrast with the Obama years is even more striking when you specify the percent of jobs created for which the subsidized private sector was responsible. In the most important measures, both numbers are roughly twice as high:
Share of total non-farm job gains: 39.60 percent

Share of conventionally defined private sector job gains: 44.25 percent
As a result, the real private sector accounted for just 58.71 percent of total non-farm job gains under former President Bush – way smaller than the share than that resulting from failing to strip out the subsidized jobs (89.48 percent).

But the data leave little doubt that the best recent job-creation performance of recent presidents was turned in by Bill Clinton – with one caveat. Here are the figures for the economic expansion that began in April, 1991 (several months before his first inauguration) and February, 2001 (a month after he left office).

 

Non-farm job change: +24.412m Percentage change +22.53

Private sector job change: +21.991m Percentage change +24.47

Subsidized private sector job change: +4.109m Percentage change +35.84

Real private sector job change +17.882m Percentage change +22.80

 

In terms of the employment-generation role played by the subsidized private sector, here’s what these numbers show for the Clinton expansion:

 
Share of total non-farm job gains: 16.83 percent

Share of conventionally defined private sector job gains: 18.68 percent

 

The one blemish in the Clinton record is the very strong relative growth shown by the subsidized private sector both in absolute and percentage terms. Yet these developments didn’t move the overall job change numbers nearly as much as under Presidents Bush and Obama because they started from a considerably smaller base.

 
Finally, let’s examine how the subsidized and real private sectors’ share of total employment on a static basis has changed since the Clinton expansion began, with the beginning and end of that recovery and subsequent recoveries as our benchmarks:

 
Subsidized private sector as share of non-farm employment, start of Clinton recovery: 10.58 percent

Real private sector share: 72.36 percent

 

Subsidized private sector as share of non-farm employment, end of Clinton recovery: 11.73 percent

Real private sector share: 72.53 percent

 

Subsidized private sector as share of non-farm employment, start of Bush recovery: 12.29%

Real private sector share: 71.41 percent

 

Subsidized private sector as share of non-farm employment, end of Bush recovery: 13.67%

Real private sector share: 70.16 percent

 

Subsidized private sector as share of non-farm employment, start of Obama recovery: 14.97 percent

Real private sector share: 67.80 percent

 

Subsidized private sector as share of non-farm employment, latest Obama data: 15.73

Real private sector share: 68.97 percent

 
The best way to sum up these trends?  In my view, it’s realizing that, since the Clinton recovery began three and one half decades ago, the American economy has generated 37.188 million net new jobs. At that time, the subsidized private sector represented 10.58 percent of total employment.  Since then, it’s been responsible for 30.72 percent of the net new jobs created in the nation — punching way above its weight

The real private sector in April, 1991 accounted for 72.36 percent of the country’s total employment.  Since then, it’s produced 59.08 percent of net new jobs — punching well below its weight.  And finally, fully 52 percent of all the added employment created since April, 1991 that is officially classified as private sector has actually come in the subsidized private sector.

In other words, Presidents come and presidents go, and the economy expands and contracts. But for the last 35 or so years, the subsidized private sector has continued to grow in relative importance. Donald Trump is already considered to be the greatest disruptor in the presidency’s recent history. Is this trend, though, too powerful even for him to resist?

*As always, my definition of the subsidized private sector is not meant to be inclusive.  It simply includes three parts of the economy – healthcare services, the for-profit education sector, and social assistance agencies – that are broken out in the Labor Department data, and that therefore are easy to identify.  It should also encompass workers in sectors like defense-related manufacturing, but many of these are much more difficult to quantify.  

 

(What’s Left of) Our Economy: Obama’s Private Sector Jobs Recovery was Increasingly Government Driven

Tags

Bureau of Labor Statistics, Employment, government spending, healthcare services, Jobs, Obama, real private sector, recovery, subsidies, subsidized private sector, {What's Left of) Our Economy

Last Friday, President Obama’s cheerleaders hailed that day’s December U.S. jobs report as proof positive that the outgoing administration has been a roaring success on the employment front. Central to their argument, according to Mr. Obama’s economic advisers themselves, has been the administration’s record in fostering private sector job gains.

In other words, the Obama camp has just given us the latest reminder that the way the government gathers and analyzes statistics can conceal at least as much as it reveals about economic trends. The main problem when it comes to such private sector jobs? As I’ve repeatedly noted, the Bureau of Labor Statistics’ definition of that portion of the economy includes enormous sectors – notably healthcare services – where levels of demand (and therefore employment) depend heavily on massive government subsidies.

And the December numbers – which provide the first take on Mr. Obama’s complete jobs performance (several revisions will be made in the months to come) – once again reveal that employment gains in what I call the “real private sector,” have been much less impressive. And that’s important because the real private sector is where the results depend largely on market forces. Therefore, they’re much better indicators of the American economy’s health than developments in industries strongly influenced by politicians’ decisions.

The December monthly figures were stellar for the subsidized private sector. It generated 70,000 of the 156,000 net new jobs (nearly 45 percent) created that month, and nearly half of the 144,000 employment improvement in the private sector as it’s conventionally defined.

These figures were unusually high. But they continue a trend that becomes clearer when looking further back into the current recovery (which pretty much coincides with President Obama’s term in office).

For 2016, as a whole, the subsidized private sector was responsible for 592,000 of the 2.157 million jobs added on a net basis – or 27.45 percent. The real private sector, meanwhile, contributed just over 64 percent of the new employment. (Government took care of the balance.)

Three years ago, the comparable numbers were 14.92 percent of total new non-farm jobs on net for the subsidized private sector and 87.23 percent of such employment for the conventionally defined private sector.

In other words, the subsidized private sector’s share of new American job creation nearly doubled, while the real private sector’s share fell by more than 26.55 percent.

From another perspective, over the last three years, the subsidized private sector’s share of the conventionally defined private sector has more than doubled – from 14.60 percent to a shade under 30 percent.

Incidentally, it’s critical to keep in mind that, if anything, these data greatly understate the importance and growth of the subsidized private sector. For they count only those subsidized private sector jobs that can be easily identified in the official monthly job reports. Digging deeper into these data would reveal many more such positions – for example, in medical-related manufacturing. And another large group of subsidized private sector workers is much more difficult to quantify – those engaged in defense-related manufacturing and service provision.

Finally, don’t mistake this effort to distinguish the subsidized from the real private sector as an effort to brand the former as “bad” by definition and the latter as similarly “good.” Any number of subsidized private sector jobs perform worthy and often vital work. Moreover, even most conservatives haven’t yet figured out a viable way to eliminate government from healthcare.

And when it comes to healthcare, don’t forget that its strong employment growth, and indeed dominance of subsidized private sector payrolls in part reflects the aging of the American population and its consequently greater medical needs.

Instead, view this analysis as an exercise in greater precision and recognizing change. Good luck running an economy successfully without them.

(What’s Left of) Our Economy: Government is Still (Indirectly) Driving Too Much U.S. Job Creation

Tags

Great Recession, health care services, Jobs, Obama, private sector, recovery, subsidized private sector, Trump, {What's Left of) Our Economy

Time for one of my favorite exercises in figuring out the American economy’s real strengths and weaknesses – as opposed to those reported by the usual mainstream media suspects. In other words, here’s what Friday’s new monthly U.S. jobs report tells us about how many of the new positions created in November and during the economic recovery have been those truly deserving the label “private sector,” and how many have come from industries heavily dependent on government subsidies (chiefly healthcare services).

This distinction seems more important than ever nowadays, with the country in the midst of presidential transition, and the media spreading the story that, thanks to President Obama, Donald Trump is incredibly lucky to be entering the Oval Office with an economy in such excellent shape – as opposed to the near-disaster situation faced by his soon-to-be predecessor.

If the new jobs figures really did bear out this claim, then you’d expect that the vast majority of the employment increase last month, and recently, would have come in the “real private sector” – because it’s always been the nation’s best bet for enduring prosperity. And by the same token, given their reliance on tax dollars and politicians’ decisions, you’d hope that new employment in the subsidized private sector would be a relatively small and even shrinking part of the picture.

Sadly, the narrative of the current recovery has told exactly the opposite story, with the November jobs figures underscoring again how employment gains in the subsidized portions of the labor market have punching considerably and increasingly above their weight.

The November statistics showed that the subsidized private sector created 44,000 of the 178,000 total net new jobs generated that month – or 24.72 percent. The private sector contributed 156,00 – or 84.67 percent. But as of November, the subsidized private sector accounted for just 15.78 percent of the nation’s total employment – a major over-performance. The private sector’s share of job gains was 87.64 percent – a minor over-performance.  (Government at all levels accounted for the remainder of the employment improvement.)

Compare these figures to those at the start of the economic recovery, in the middle of 2009. At that time, when the economy was still losing hundreds of thousands of jobs per month, the subsidized private sector accounted for only 14.97 percent of total employment – but it gained 31,000 jobs that month. Indeed, it was the only net job-creation game going, as private sector employment was 82.77 percent of total jobs and shed 429,000 jobs.

At the start of the last recession, at the end of 2007, the subsidized private sector’s share of total American employment was even lower – 13.63 percent – though it was generating more than half of all the net new job created then. The total private sector represented 83.83 percent of all U.S. employment, but was responsible for only 56.70 percent of new job creation – i.e., not much more than the much smaller subsidized private sector. (Government at all levels added the balance of new jobs – more than 43 percent.)

And what happened to the real private sector during this time?  Its share of total American employment sank from 70.19 percent to 67.88 percent and last month totaled only 62.92 percent. 

The burgeoning role of the subsidized private sector also becomes clear by looking at job creation patterns over the last four years. During the first eleven months of 2013, 14.92 percent of all the economy’s new jobs came in the subsidized private sector. Moreover, these industries made up 14.60 percent of all the conventionally defined private sector jobs generated. During the first eleven months of this year, these numbers had increased to 24.82 percent and 30.18 percent, respectively.

Subsidized private sector jobs as a share of total jobs created actually dipped from 2015’s levels – when they stood at 25.27 percent. But that’s because the pace of government hiring more than doubled. More revealingly, the subsidized private sector represented 26.05 percent of all the conventionally defined private sector jobs created during the 2015 period. During the first eleven months of this year, this share increased to 30.18 percent.

From the opposite perspective, from January through November, 2013, 87.23 percent of all U.S. jobs created were real private sector jobs. By the first eleven months of this year, that figure had sunk all the way down to 63.52 percent.

As I keep reminding, no one should take this analysis as an argument that subsidized private sector jobs are “bad.” Obviously, the healthcare industry and social assistance agencies and for-profit educational institutions perform critical functions for any civilized society. But their reliance on government assistance just as obviously puts them in a different category from sectors of the economy where growth (and therefore hiring) to a much greater extent on free market forces. And no one should mistake their ballooning payrolls as a sign of healthy economic fundamentals.

As a result, I fervently hope that the new administration will direct the government’s statistical agencies to start drawing this distinction. If you care about knowing the real deal about the state of the economy, you will, too – and send your elected officials the message.

(What’s Left of) Our Economy: Away from Election Spotlight, Troubling Jobs Market Signs

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Federal Reserve, interest rates, Jobs, JOLTS, labor market, subsidized private sector, wages, {What's Left of) Our Economy

The failure of Wednesday’s monthly Labor Department reading on job turnover (for August) to attract much attention amid presidential campaign scandals is as understandable as it’s unfortunate. For this last set of “JOLTS” numbers that we’ll get before election day continues showing levels of openings in low-wage sectors hovering near recent highs recorded during this recovery. And the more generally humdrum nature of the findings – total openings fell sequentially to an eight-month low of 5.443 million – could cast a little more doubt over the chances of the Federal Reserve viewing the economy and labor market as strong enough to justify another interest rate hike.

These low-wage portions of the economy consist of the retail sector, leisure and hospitality industries, and the big low-wage administrative and support services sub-sector of the larger and higher wage professional and business services category.

Add up the August openings in these industries and you come up with 32.98 percent of the total (which is still preliminary). That’s not a record for this troubled recovery – but it’s close. Further, it’s higher than July’s final 32.36 percent, which itself was revised up from 32.17 percent.

For some perspective, recall that when the Great Recession officially began, at the end of 2007, low-wage job openings made up 31.94 percent of total openings. At the recovery’s outset, in June, 2009, their share fell to 28.38 percent. So during the current expansion, this number is up more than four and a half percentage points.

The JOLTS data – which are widely thought to be especially closely followed by Fed chair Janet Yellen – also shed light on the prominence of the subsidized private sector in the recovery’s jobs landscape. These are parts of the economy that are placed into the private sector category by the statisticians, but that depend heavily on government spending for their activity levels and therefore the vigor of their hiring. Healthcare services are the leading example.

In August, they accounted for 15.75 percent of all the nation’s non-farm jobs. (The Labor Department’s American employment universe.) But that month, they generated 19.20 percent of all job openings – a finding consistent with their lead role in actual employment growth during the recovery. As a result, rather than accounting for nearly 91 percent of these employment opportunities in August, the “real” private sector produced only about 71.50 percent.

When the Great Recession began at the end of 2007, subsidized private sector openings made up 17.65 percent of the total. When the recovery began in mid-2009, the figure was 22.28 percent – since at that point the national employment picture remained so bleak that the subsidized private sector was virtually the only sector showing any signs of life. And even today, the figure is two and a half percentage points higher than before the last downturn.

Needless to say, since employment issues themselves have barely been discussed in the general election campaign, it’s inconceivable that these JOLTS trends would be brought up. And needless to say, that’s a great way to ensure that the national jobs market becomes ever more dominated by depressingly unproductive industries like healthcare and by menial service positions.

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.