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Current Trade Deficit:    
Job Growth Turns Healthier -- Except in Manufacturing
Alan Tonelson
Friday, February 01, 2013
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Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).
This morning’s jobs report, and especially major revisions for November and December, vigorously scrambled our understanding not only of recent job creation’s strength, but of its structure as well.  

In addition to showing stronger late-2012 hiring than originally estimated, the January jobs figures showed that the economy’s subsidized private sector (industries like health care services that receive big government subsidies) played a considerably weaker role in job creation than previously gauged.  Hence, the “real” private sector, where growth and hiring are overwhelmingly shaped by market forces, performed better as a job creator.

If a stronger and sustainable U.S. recovery depends on reinvigorating industries not heavily dependent on government largesse, the new improvement shown by the real private sector is encouraging news – assuming the numbers aren’t substantially revised again in coming months.

At the same time, the subsidized private sector has continued to create more jobs than its share of total employment when the current recovery technically began in the middle of 2009.

Revisions also affected manufacturing, with the new numbers small in absolute terms but big in percentage terms.  Overall, they confirmed a significant slowing in manufacturing job gains since the middle of last year.  

Worse, manufacturing’s share of total U.S. jobs (8.86 percent) is back to its levels when industrial employment bottomed in January, 2010, and well below its 9.96 percent share when the recession began.

The January jobs report – whose numbers will be revised twice more – showed that the economy’s subsidized private sector created 25,000 net new jobs.  As a result, hiring in the real private sector increased by 141,000, not the 166,000 indicated by the BLS’ private sector figures.

As a result, industries heavily reliant on government spending created 15.92 percent of the 157,000 total nonfarm jobs reportedly created in January, and 15.06 percent of the private sector job gains reported.  When the recovery began, these sectors accounted for 14.68 percent of total nonfarm jobs (the BLS U.S. employment universe), and 17.76 percent of private sector jobs conventionally defined.  Today, the subsidized private sector’s share of total nonfarm employment is up to 15.23 percent, and its share of conventionally defined private sector employment is up to 18.18 percent.

Indeed, during this recovery, the subsidized private sector has accounted for 1.360 million of the 4.247 million total nonfarm jobs regained (32.02%) and 27.38 percent of the 4.968 million conventionally defined private sector jobs created.

Consequently, the real private sector’s share of total employment is still lower than at the start of the last recession.  In December, 2007, the figure was 70.34 percent.  In January, it was 68.55 percent.  

The new jobs figures show a major decrease in the role of the subsidized private sector since November.  The second set of revised figures for that month show that the subsidized private sector generated only 9.72 percent of total nonfarm jobs gained, and only 9.38 percent of net new conventionally defined private sector jobs.  Those are both well below the 12.33 percent and 12.24 percent levels originally reported.

Today’s revisions also produce major changes in the December picture.  Last month, the subsidized private sector was reported to have created fully 41.99 percent of total new nonfarm jobs and 38.69 percent of new total private sector jobs.  This morning’s numbers for December reduce these to 24.99 percent and 23.76 percent, respectively, though they still point to outsized hiring in these subsidized industries

January’s advance manufacturing figures show a net gain of 4,000 jobs for the sector – down from 8,000 in December and 7,000 in November.  Yet the November and December revisions in industry were meaningful, too.

The original November manufacturing job numbers reported a net loss of 7,000, which was subsequently changed to gain of 5,000.  The first December figure, released last month, showed a hiring increase of fully 25,000.

The bottom line for manufacturing as of now is that the sector has now regained 229,000 of the 2.018 million jobs it lost during the recession (11.35 percent).  Since manufacturing employment bottomed out in January, 2010, its job gains have totaled 490,000 – 24.28 percent of the 2.286 million jobs lost from peak to trough.  

Manufacturing employment, therefore, now represents 8.86 percent of all nonfarm jobs – actually down from the end-of-recession figure of 8.98 percent and from its 9.96 percent share when the recession began.  Indeed, manufacturing’s share of total U.S. employment is now back to its levels at its 2010 nadir.

Since the recession’s June, 2009 technical end, manufacturing’s job gains have amounted to only 5.39 percent of the total nonfarm jobs created.  Since manufacturing’s employment bottom, its hiring has represented 8.90 percent of the 5.505 million net new nonfarm jobs created.




Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).