Looking at the stock market hitting new highs almost every day one could be forgiven for thinking that the economy is actually improving.
In case you think there is some "real" improvement going on just remember that the Fed is printing $85 billion a month and the government is running a deficit of about the same magnitude. Even with all this stimulus barely enough jobs are being created to handle new entrants into the labor force.
My thesis is that current policies will not create jobs, but will create asset bubbles (helping the 1%). I maintain that underlying structural changes in the job market remain unaddressed and even unrecognized. I further maintain that if you look at the data below it is clear that current policies can not bring long term unemployment down without major changes in policies.
To start ... let's look at what has happened to the job market over the last 10 years (an arbitrary point I agree, but let's see where it takes us - all data compare April 2013 to April 2003).
For reference ... the economy added 5,586,000 jobs in total over the 10 year period.
1. Q: Did government employment grow excessively?
A: No! Over the last 10 years government has added 226,000 jobs while the private sector has added 5,324,000. So in fact, the government share of jobs in the economy has dropped from 16.94% to 16.43%
2. Q: Have we become a more of a service economy?
A: Yes! Over the last 10 years we have added 8,548,00 jobs in services and lost 3,224,000 jobs in good producing sectors. That is a huge swing in 10 years. As a result service jobs now account for 83.7% of private sector jobs (up from 79.9%) and goods producing jobs have dropped to 16.3% from 20.1%.
Why is this important? Because in order for unemployment to drop, jobs have to be created somewhere and it is clear that one key sector in the economy is lagging badly and acting as drag on performance. The bigger problem is that jobs in this sector tend to be higher paying.
3. Q: Which goods producing sectors have been hit the hardest?
A: We can start by looking at three broad classifications.
Manufacturing has lost 2,633,000 jobs or 18.1% of total 2003 employment.
Construction has lost 889,000 jobs or 13.% of 2003 employment.
Mining/logging/oil&gas is the lone bright spot adding 314,000 jobs or 63.8%!
The manufacturing changes can be broken down into durables (think cars etc) and nondurables (think food/clothes etc). Both classifications had big losses. Durables were down 16.8% and non durables by 20.2%. Stop and think for a second how important these stats are. Over the last 10 years the number of jobs in the US has climbed by about 5%, but manufacturing jobs have dropped by about 20%.
Within these classifications we also have some even bigger losers. Motor vehicles and parts are down by 28.2%, wood products by 36.2%, and perhaps most worrying (this is supposed to be the tech engine) computers and electronics by 21.4%. The one somewhat healthy sector seems to be food manufacturing (which accounts for about 1/3 of non-durables) which only lost 2.6% of its workforce.
Q: What sectors have added the most jobs?
A: It is pretty simple. Although there have been changes in many categories two stand out above all the rest. Remember from above that services added about 8.5 million jobs over the last 10 years.
Restaurants and bars up 1.7 million or 20.3%
Health care - up 2.7 million or 23%
Home health care up 75%
Outpatient care up 60%
Physician offices up 22%
Together these two categories which made up about 1/4 of service jobs in 2003, added fully 1/2 of the service jobs.
Think about it. These are the two biggest drivers of employment over the last ten years - food service and health care - essentially two fields that are hard to outsource. One (food service) performs a service that most people could do on their own if they had the time or inclination. As such a severe recession could decimate these businesses. The other (health care) is an industry where the US already spends double what any other nation on earth spends (as a % of GDP). One has to wonder where further growth is going to come from without consuming the entire economy. Heath care already employs more than 1/10 people in the US. Surely this can not be the future engine of growth for much longer.
There are some other interesting tidbits. Both financial services and information lost jobs over the last 10 years and retail added a measly 200,000 jobs (1.5%).
Social services was not surprisingly another big source of jobs - up 657,000 or a whopping 31%! as was temp hiring - up 500,000 or 25%.
Current economic policies seem concentrated on waiting for things to somehow magically get back to normal. What I hope these figures (sorry about the number overload) show is that "normal" in the future can NOT be what "normal" in the past used to be.
Over the last ten years not only has new employment not kept up with population growth, but the jobs that have been added are not what one would consider to be jobs that are building a stronger more sustainable, wealthier economy.
I think we have reached a point in the recovery where things are not getting worse, As such weekly jobless claims are down and there is some minimal hiring. BUT this is with the MASSIVE tailwinds of printing money (equal to about $500,00 for each job created) and government deficits. I think given the structural changes in the economy it is going to be exceedingly difficult to move from neutral (where we are now) to first or even second gear.
The only beneficiaries of current policies are the 1% - the people with stock investments, and assets that will appreciate as the financial bubbles expand. So we, the 99%, are stuck in neutral at best. Major changes are required, but unfortunately that are not happening. The 1% still rules.
Note: all data from http://www.bls.gov/...