Michael Mandel begins his latest provocative Business Week piece, "What's Really Propping Up The Economy", this way:
Since 2001, the health-care industry has added 1.7 million jobs. The rest of the private sector? None.
In case you don't believe it, he also provides this picture, at Economics Unbound:
As I said, provocative. But I'm not entirely convinced. If you take a slightly more disaggregated look at private nonfarm employment, you will find that there are really three types of job-growth patterns since 2000:
The no-growth group: Those industries that really did decline, or flatten, and have not yet recovered. Manufacturing is the biggest and most dramatic case by far, but there are others: Wholesale and retail trade (if we strip out those activities clearly related to the health care industry), transportation and warehousing, "other services" (which includes things like auto repair and servicing, funeral services, and unions), utilities, and information. Although employment in the mining and natural resources industry has been growing in the past couple of years, the trend had been down for most of the past 15 years -- so I'll throw that one into this group for good measure.
The recession-proof group: These are the industries in which employment grew steadily right through the 2001 recession, and beyond. The health-care industry is the biggest in the group, but there are others: Finance and insurance (even excluding employment related to medical insurance), education, and social assistance. Together employment in these other groups add up to nearly the same number of jobs as the health-care industry.
The bounce-back group: Job growth in this group was hit by the recession -- hard in some cases -- but employment in these sectors has again begun to grow at a steady pace in the past several years. The leisure and hospitality industry, construction, real estate, and professional and business services are all in this category.
That last group is particularly important. If we are talking about economic growth -- and I think we are -- the important question concerns what is happening at the margin. It is indeed clear that there were some very major adjustments associated with the last recession and its aftermath. Whatever the story on those adjustments, these are industries that typically grow in expansions, that have resumed to grow again in this expansion, and for which we have every reason to believe said growth will continue.
There is no doubt that, as Michel indicates in his latest post on the subject, the health-care industry is an increasingly important part of our economy. Even ignoring the fact that job growth is not exactly the same thing as economic growth -- the manufacturing sector continues to be an important contributor to GDP growth even though it has not been a source of net job creation for ever 40 years -- it is way too simple to say assert that this is the sector "propping up" the economy. And way too easy for policymakers to start down the wrong path if they believe it was so.
The pictures: First, the no-growth group -
Next, the recession-proof group:
Finally, the bounce-back group:
Here is the data, if you are interested: