Jobenomics tracks both unemployment (see: Unemployment Scoreboard: February 2013) and employment reports (this posting).
For six decades, the US consistently produced tens of millions new jobs per decade. Then the bottom fell out with a loss of 1.2 million jobs in the ‘00s. Many believe that the Great Recession of 2008 caused such a catastrophic loss of jobs. Others believe that this is too simple an answer. Whatever the reason, it is critical that we produce a significant number of jobs this decade (’10s) for the US economy to recover. 20 million new jobs by year 2020 is a reasonable goal. Based on this goal, the US should have produced 9.25 million jobs by 1 February 2013. We have only produced 5.51 million, which represents a 40% shortfall.
Today, the 134,825,000 Americans are employed. 94,417,000 (70.0%) work in service-providing industries. Service industries include professional services business, education and health, financial, trade, retail, transport, distribution, and information-dominated businesses. 18,544,000 (13.8%) are in goods-producing industries that include manufacturing (8.9%), construction (4.3%) and mining. 21,864,000 (16.2%) Americans work for government at the federal, state and local levels. Since government employment is services-related, a total of 86.2% of all Americans work in service industries.
While the US has enjoyed some employment growth since the beginning of this decade, America is only producing 60% (40% shortfall) as many jobs as needed. The US produced only 5,506,000 jobs compared to the 9,250,000 jobs needed as measured against the traditional benchmark of 250,000 jobs per month (250,000 x 37 months = 9.25 million). Of the three employment sectors reported by the Bureau of Labor Statistics, the private sector’s service-providing industries created 5,361,000 jobs, the private sector’s goods-producing industries created 760,000 jobs, and the government sector lost 615,000 jobs—with 77.1% (474,000) of all government jobs lost at the local level.
83.5% of all new jobs this decade were produced by four industries in the service providing sector (professional and business services; education and health services; trade, transportation, utilities; and leisure and hospitality). Much touted manufacturing contributed 7.8%, which is vital but not significant. The non-internet information industries lost jobs during this decade. Government, at all levels, lost jobs.
Private sector businesses by company size. The following charts examine private sector businesses by size. As reported by the ADP National Employment Report (published monthly by the ADP Research Institute in close collaboration with Moody’s Analytics), data indicates that small business is the dominant economic force in terms of employment and job creation.
Today, small businesses employ 77% of all private sector Americans. The single biggest employer are small businesses with 50 to 499 employees (note: the US Government’s Small Business Association defines small business as a business that employs less than 500) with a total of 40 million employees—greater than twice the amount of large corporations. Very small businesses with less than 19 employees also employ more than very large corporations (28.9M versus 17.5M).
Since the beginning of this decade, small business produced 67% of all new jobs. This is an amazing statistic considering the adverse lending environment by financial institutions, mounting government regulation, and the pittance of federal government spending on small businesses. Equally important, is the lack of commercial lending to very small and startup businesses that have been starved for capital. Very small businesses with less than 19 employees created only half (13%) as many jobs in comparison to the amount that they currently employ (26%, see earlier chart). Very small and startup businesses have traditionally been the primary source of employment for entry-level workers and the long-term unemployed. Had the US government paid more attention to this category of employers during its generous handouts of $14.6 trillion worth of stimuli, bailouts and buyouts since the Great Recession, Jobenomics estimates that as many as five million more Americans would be employed today.
According the US Small Business Association, startups, minus closures, create about 40% of American net new jobs. Also according the SBA, about half of all new businesses survive five years or more, and about one-third survives 10 years or more. Jobenomics is currently working with a dozen US cities to implement Jobenomics Business Generators to create hundreds of thousands of new startup businesses. The objective a Jobenomics Business Generator is to increase “birth rates” of new businesses as well as to extend the “life span” of new businesses.
It is a common misperception that small businesses, especially very small (1-19 employees), are the most fragile. The following chart indicates that very small businesses have been the most resilient of the five ADP business categories following the Great Recession of 2008. This fact cannot be understated in an environment where small businesses have been starved for investment capital from financial and government institutions.
It is also a common misperception that small businesses dominate service-providing industries and large major corporations dominate the goods-producing industries. The above chart indicates that small and medium sized businesses play a major role in both good-producing (manufacturing, construction, and mining) as well as the services industries.
Service-providing sector. The US service-providing sector now employs 94,417,000 and has grown 84% over the last three decades.
The US service-providing sector averaged 6% growth since the beginning of this decade with 5,310,000 new jobs created. Today, the US service-providing sector employs a total of 94,417,000 people across the seven industries shown below.
Employment statistics for industries in the service-providing sector are ranked by the number of jobs created between 1 January 2010 and 1 February 2013 (37 months):
- Professional/business services: 1,667,000 new jobs
- Education and health services: 1,182,000 new jobs
- Trade, transportation, utilities: 1,276,000 new jobs
- Leisure and hospitality: 983,000 new jobs
- Other services: 158,000 new jobs
- Financial activities: 94,000 new jobs
- Information (non-internet, like publishing): -50,000 jobs lost
Of the seven service-providing industries, only the Information (non-internet) industry lost jobs (-1.8%) during the post-Great Recession recovery period starting in January 2010. The top three industries are Professional & Business Services (+10.1%), Leisure & Hospitality (+7.6%) and Education & Health Services (+6.1%).
Goods-producing sector. The US goods-producing sector currently employs 18,544,000 and has declined 24% since its peak in October 1999.
US goods-producing sector has grown by approximately 900,000 since its post-recession low in February 2010, but has a long way to go to reach peak employment. Today, the US service-providing sector employs a total of 18,544,000 people across the three industries shown below.
Employment statistics for industries in this sector are ranked by the number of jobs created between 1 January 2010 and 1 February 2013 (37 months):
- Manufacturing: 479,000 new jobs
- Mining and logging: 198,000 new jobs
- Construction: 81,000 new jobs
The fastest growing industry in the goods-producing sector is Mining & Logging, followed by manufacturing and construction. The goods news is that the construction industry is now positively producing jobs for the first time since the Great Recession.
While manufacturing has added about ½ million new jobs since the beginning of this decade, it has a long way to go to achieve peak its peak level of 19.6 million in June 1979 after sustaining a consistent growth rate from its post-World War II low of 12.5 million in September 1945. Since its peak in 1979, the US manufacturing industry has declined by 39%. Today, US manufacturing employes 11,950,000.
While the addition of 490,000 new jobs from manufacturing’s all time low of 11.46 million in January 2010 is positive, the manufacturing sector is still in the doldrums. Notwithstanding the political rhethoric about increasing US exports, re-shoring of US manufacturing jobs and increased US productivity, Jobenomics forecasts limited upside jobs potential in manufacturing due to excessive government regulation, improved automation, competitive foreign labor rates and a lack of higher-tech manufacturing skills in our civilian labor force (see Jobenomics’ Manufacturing Industry Forecast posting). The advent of new technologies (like 3D printing of manufactured parts and advanced robotics) reduce the need for non-skilled labor. By some accounts, US manufacturers have 3.5 million open high-tech jobs that currently are unfilled.
Jobenomics is also concerned by the amount political and public emphasis on the manufacturing growth as the primary engine for jobs creation. While manufacturing is vitally important to our nation, political emphasis needs to be on the high growth industries in the service sector. Manufacturing emphasis should be on protecting our gains and focusing on next-generation manufacturing technology, processes and recapitalization.
Construction industries continue to struggle after a rapid rise (69%) during the go-go years in the 1990s and the housing bubble in the early 2000s. In the 2006-07 time period, peak construction employment was 7.73M. Today, it is 5.73M, a loss of -26%. The good news is that construction employment has stopped its decline and has increased for its post-recession low of 5.44M in January 2011 and is now 5.73M today—a gain of 290,000 jobs.
Residential construction was hardest hit with a decrease of -39%. Commercial and heavy construction fared slightly better with -20% and -15% losses respectively. Construction, lead by residential construction, usually leads economic recoveries. However, this recovery is different. Jobenomics forecasts that the residential construction industry will not produce a significant number of jobs for the remainder of this decade due to foreclosures, underwater mortgages, unemployment as well as changing attitudes to the value of homeowners. Due to the stagnant economy and government deficits, commerical and heavy construction is also unlikely to produce a significant number of new domestic jobs. Jobenomics does see potential in major foreign construction projects, green construction and rennovation of older homes, and reconstruction of disaster areas like the Northeast after Hurricane Sandy that is getting a $60 billion infusion of cash form the federal government. However, these bright spots will not make up for stagnance in other areas until US GDP increases significantly.
Mining (oil & gas extraction, coal and minerals) and logging goods-producing sector continues to be a bright area for employment growth. An increase of 198,000 jobs, with a growth rate of 29.6%, is impressive. With proper private and public sector support, this industry has significant upside potential.
Mining exploration and support employment has more than doubled in the last decade and likely to double again with exploration for domestic energy sources. Oil and gas extraction is also likely to double with new natural gas, oil shale, oil sands and offshore oil resources are exploited via new technology, like horizonal drilling and fracking. Minerals mining employment has been stagnant over the decade, but this may change as commodity prices (gold, silver, copper) increase as well as worldwide demand for these commodities increase. Coal mining and logging are not likely to increase anytime soon mainly due to environmental pressure and the emphasis on clean renewable technology (wind and solar).
Government Sector. Total government sector employment currently is 21,864,000. Since 1 January 2010, government has lost 616,000 jobs, a negative 2.7% growth rate.
Employment statistics in this sector are ranked by the number of jobs lost between 1 January 2010 and 1 February 2013:
- Local government: 14,027,000 employees, -475,000 jobs lost, growth rate -3.3%.
- State government: 5,046,000 employees, -105,000 jobs lost, growth rate -2.0%.
- Federal government: 2,791,000 employees, -36,000 jobs lost, growth rate -1.3%.
The government sector continued to lose jobs with 77.1% of all job losses occurring with local government (mainly teachers, police and firefighters), 16.6% at the state level and 6.3% in the federal government (not including military, which is also downsizing). Jobenomics predicts that government job losses will continue to decline and accelerate at the federal and local levels especially if the US economy suffers an economic disruption due to either domestic or foreign events.
In conclusion, business and jobs creation is the number one issue facing US economic recovery. While some would argue that debt/deficits or entitlement/welfare are the biggest issues, it takes businesses to create lasting jobs that generate tax revenue to run government as well as supporting the less fortunate. The following chart is about as simple as Jobenomics can make it.
32% of all Americans are financially supporting the rest of the country. 102 million workers in the private sector are supporting 32M that work for government (including contractors), 89M that can work but choose not to work, 70M that cannot work (children, retired, disabled, etc.) and 23M that are looking for work (officially unemployed and unemployed). America’s number one priority is to grow the base with emphasis on small business creation, which produced 67% of all new jobs this decade.
 US Small Business Association, Office of Advocacy, Which businesses create more jobs—startups or existing businesses?, http://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf