Economics, Pethokoukis

Was nearly 40% of ‘private-sector’ job growth in December subsidized by government?

The U.S. economy created 168,000 private-sector jobs in December. But all private-sector jobs are not alike, of course. One way to examine them is by determining which are the mostly the result of market forces and which are the result of debt-fueled government subsidies. Alan Tonelson of the U.S. Business and Industry Council:

This morning’s jobs report shows that the economy’s subsidized private sector (industries like health care services that receive big government subsidies) is back as a major source of new hiring.  If a stronger but sustainable U.S. recovery depends on reinvigorating industries not heavily dependent on government largesse, then this hiring out-performance by the subsidized private sector is a bearish indicator.

As Tonelson figures it, the subsidized private sector created 65,000 net new jobs in December nearly 40% of total private-sector job growth, about the same as throughout the recovery. But is that a lot or a little? Tonelson:

Such subsidized private sector job creation represents major out-performance, since these industries’ share of total nonfarm employment was only 15.32 percent in December.

Certainly an interesting way of analyzing the health of the U.S. labor market, particularly the growth of jobs in unproductive, government influenced sectors such as healthcare and education. These numbers made me recall this bit from economist Tyler Cowen on the EconTalk podcast

Consider our economy right now: about 17% of it is health care; about 6% in terms of GDP is education; and with some overlap, 15-20% is what we call government consumption–government activity, not just transfers. At all levels of government, including state and local. Add those all up, take out the overlap, and it’s a pretty big chunk of the economy, like 20-30%. Those are all sectors where there are massive subsidies, massive distortions of incentives, a lot of bad policy; and it’s hard to measure value.

This economic recovery has been weak, but is it sustainable even at this low level without more help from debt-strapped Washington? Is it even a recovery if you define one as private-sector led growth?

2 thoughts on “Was nearly 40% of ‘private-sector’ job growth in December subsidized by government?

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>