Jobs 2012: Government Jobs Exceed Goods-Producing Jobs

We’re starting a new series titled, Jobs 2012, which will drill down into the employment and jobs data. We’ll analyze what kind of jobs are being created and lost in the current recovery, look at short and long-term trends, and the overall structure of the U.S. labor force.   We feel the series is timely as jobs are the most important issue for voters in this Presidential election according to a recent Gallup poll.

(click here to view prior posts on the jobs market)

Our first post of Jobs 2012 is a big picture view of the U.S. labor market.   We’ve analyzed and charted the latest data from the Bureau of Labor Statistics (BLS) showing trends in the three major sectors of the jobs market:  1) Private goods-producing; 2) Private service-providing; and 3) Total government jobs.

We were surprised at what we found.

First, recognized by Iacono Research in 2010,  total government jobs at the federal, state, and local level, now exceed total employment in the private goods-producing sector,  including manufacturing, construction, mining and logging, which also includes oil and gas extraction.  We didn’t expect this.

Really? More government jobs than goods-producing jobs?  In the United States?

This is one data point, in our opinion, that embodies the U.S. zombie-like economic recovery and fiscal problems that the state and local governments are now experiencing.  It also helps explain the record level corporate profit margins.

We love our public sector employees,  but also recognize wealth and sustainable demand are created in the private sector.  Without asset inflation the conventional economic wisdom seems to be moving toward the view that quality goods-producing jobs are essential for a better economic future.

For example, if the house of a lower paid service worker, such as a retail clerk at Wal-Mart, is not appreciating on an annual basis,  it’s difficult for the global economy to generate the wealth induced aggregate demand to absorb the capacity it built out during the bubble.  Ask China.

Click here for an interesting (wonkish) piece on the rise of low paid service jobs and polarization of the U.S. labor market

Second, the trend toward a service-providing labor force began just after WWII and is hardly new though it did accelerate after the bursting of the dot.com bubble when corporations were caught with excess capacity.  The percentage of private goods-producing jobs of total nonfarm employment, for example,  peaked in 1943 at 44 percent during the wartime economy and has since been in a secular decline and now less than 14 percent in 2012.

The falling cost of automation, globalization, relative wages, productivity increases, consumer/worker preferences, the rise of the internet, and political forces, are just a few of the many causes of the shift to service jobs, which now make up almost 70 percent of nonfarm payrolls.

The causes and solutions for the weak U.S. jobs market are topics for Ph.D dissertations, beyond our pay grade,  and the scope of this simple post.   We’ll let the President and Governor Romney slug it out on how they plan to fix it.

More to come.   Stay tuned.

(click here if charts are not observable)