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Makin' Money

The great job shift

Chris Farrell Jun 3, 2011

The nation added a mere 54,000 nonfarm payroll jobs last month. It’s a steep drop from the 220,000 average pace of the previous three months. And it makes our stories on Marketplace Money this week about the job market even more timely.

For additional insight, we turned to Michael Mandel. He’s a maestro when it comes to interpreting the economic numbers. Mandel follows the economy from his perch as chief economic strategist for the Progressive Policy Institute and senior fellow at the Mack Center for Technological Innovation, Wharton School. He was formerly chief economist at BusinessWeek. You can read his blog here.

He sliced into the employment data to highlight a critical shift in the economy.

Michael Mandel: Can you guess what sector has been the biggest contributor to private job growth since the February 2010 job market low? If you answered education and health services, go to the head of the class.

The economy has generated 2.1 million private sector jobs since the labor market hit bottom early last year. And out of that total, 554,000 or roughly a quarter of the total, have come from private-sector education and health enterprises . That’s includes hiring by employers like hospitals and private-sector higher education. By comparison, the much bally-hooed manufacturing revival has generated only 232,000 jobs over the same stretch, less than half as many.

The differential stands out even more strongly if we look back to the beginning of the recession in December 2007. Since then, overall private sector employment has shrunk by 6.7 million, while jobs in the education-health sector have grown by 1.4 million.

What are we to make of this? We’re seeing the intersection of the two major labor market trends of our time. First, our manufacturing sector is still losing ground against the rest of the economy, no matter what people say about the socalled manufacturing revival . Over the past year, manufacturing jobs have risen by only 1.4%, compared to 1.6% for the private sector as a whole and 2.3% for the education-health sector. The weakness in manufacturing reflects the sharp rebound in U.S. goods imports, which are now almost back to their pre-crisis level.

Second, employment is growing in the sector– health and education–which receives the largest amount of direct and indirect government support. When the recession started, education and health made up 16.1% of private sector jobs. Now they are 18.3% of private sector jobs and rising.

For many economically-depressed parts of the U.S., the education-health sector is the only growth industry that they’ve got. But for the country as a whole, the continued dominance of education and health jobs is a sign of the overall weakness of the rest of the economy.

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