Popular wisdom has it that the current economic expansion is relatively weak in job growth compared with other expansions, and that the health sector has played a larger role in job growth during this recovery than the non-health sectors. In this essay, we examine the validity of these notions by comparing health, non-health and total employment growth for the current expansion with that of a comparable period during the previous two economic expansions. As shorthand, we will call the expansion beginning in June 2009 the "current" expansion, the one prior, beginning in November 2001, the "Bush" expansion, and the one beginning in March 1991, the "Clinton" expansion.
Starting with the month when each economic expansion began (called the "trough," as it also signifies the point at which the economy stopped deteriorating), we compare patterns of growth in total payroll employment (nonfarm jobs), health employment, and non-health employment. We use the official National Bureau of Economic Research business cycle dating to peg the month for the three troughs, and we look out 50 months from that date for each expansion, which corresponds to the length of the current economic recovery. Thus, the Clinton expansion began in March 1991, and we follow it through April 1995. The Bush expansion began in November 2001, and we track it through December 2005. Finally, the current expansion began in June 2009, and, with the 8/2/12 Bureau of Labor Statistics release, we have data through July 2013.
For each recovery, we compute growth indices by dividing each month's employment by the corresponding level at the trough. An index value of 1.05, for example, would indicate that employment had grown 5 percent above the level observed at the start of the recovery. We compare employment growth over the same length of time to assess the relative strength or weakness of the jobs recovery over the three expansions, and we further examine the role played by the health sector in each expansion, allowing us to draw the following conclusions.
- The Current Expansion Is Not Especially Weak, It Just Started from a Much Deeper Hole
Exhibit 1 shows total employment growth represented by our indices for the three expansions. For all three expansions, growth was disappointingly slow for well over a year. Indeed, part of the reason that contender Clinton was able to oust incumbent George H.W. Bush was what became known as the "jobless recovery." The exhibit also shows the dramatic acceleration of the Clinton expansion after about two years, clearly outpacing the other two expansions and ultimately becoming the longest in U.S. history.
These expansions exemplify the modern era of service sector - dominant economic recoveries. Employment growth is initially weak because, unlike in prior, manufacturing-led expansions, there is no immediate back-to-work call by companies who have fairly simultaneously depleted their inventories and faced increased product demand, requiring an acceleration in production.
When measured in terms of employment growth since the trough, the current expansion is not especially weak, but it is perceived to be because the recessionary drop in jobs was so severe. It took 14 months, 29 months and 20 months, respectively, for the Clinton, Bush and current expansions to return to employment levels prevailing during the trough month. The chart below indicates that the index relative to the trough at 50 months was 1.078 (highest) for the Clinton expansion, 1.030 for the Bush expansion (lowest), and 1.042 (in between) for the current expansion. However, unlike the previous two expansions, the current expansion had such a large hill to climb that at 50 months it has still not achieved pre-recession employment levels.
Exhibit 1: Total Employment
2. Health Employment Growth Highest Under Clinton; Health Sector Most Dominant for Bush
There are various reasonable hypotheses about health employment's role in the three economic expansions. First, we might assume that health employment growth during the Clinton expansion was weak due to hiring constraints imposed in the managed care era of the 1990s. Second, we might think that the Bush health sector employment growth must have been particularly strong because of the surge in health care utilization and spending that characterized the managed care "backlash" of the early 2000s. Finally, with policies stimulating health spending, we might hypothesize that health jobs, as the "major bright spot" in the weak current expansion, must be playing a dominant role. None of these hypotheses is borne out by the data.
Exhibit 2: Health Employment
As shown in exhibit 2, unlike total employment, health employment grew steadily during each recovery. However, in contrast to the above hypotheses, the strongest growth was seen during the Clinton expansion, while the weakest is occurring during the current expansion. By the 50th month of the recovery, the health jobs index was 1.147 for Clinton, 1.098 for Bush, and 1.076 for current. Accordingly, job creation during the Clinton expansion benefitted significantly from health sector jobs (about 1.25 million jobs for the 50 months; not shown). Bush health sector employment growth was moderate despite the managed-care backlash. And while there is no doubt that health jobs are a relative bright spot in the current expansion (as are any jobs following the worst recession since the Great Depression), these data show that health sector employment growth has been relatively weak over these 50 months, compared with the previous two expansions. Dividing the gain in health care jobs by the gain in total jobs provides another perspective. For Clinton, about 15 percent of the total jobs came from the health sector. For Bush, the figure was 28 percent, and for the current expansion, it is nearly 19 percent.
3. Non-Health Employment Growth Typifies Slow Recoveries in the Post-Manufacturing Era
In addition to emphasizing some of the points made above on total employment, exhibit 3, showing non-health employment, illustrates the frustratingly slow employment behavior early in each of the last three expansions. While the Clinton expansion (which actually began under President George H.W. Bush) had been given the moniker "jobless recovery" by economists, the George W. Bush expansion was labeled the nation's first "job-loss recovery." And accounts of the current expansion are a veritable thesaurus of "weak," "tepid," "feeble," and other descriptors. Amazingly, for Clinton, non-health employment remained below the employment level at the start of the "recovery" for 18 months, 32 months for Bush, and 21 months for the current one. After 50 months, these indexes were: 1.072 for Clinton; 1.024 for Bush; and 1.038 for current. The current expansion most closely tracks the Clinton expansion for about the first two and one-half years, but non-health employment growth did not accelerate after that point as it did in the Clinton expansion.
Exhibit 3: Non-Health Employment
The picture that emerges from this tracking of employment growth across equivalent expansion periods differs markedly from the image most of us have of these three economic cycles. We close with an observation regarding the overall trends in the health and non-health employment trajectories. Since January 1990 (283 months), there have been only 49 months where the year-over-year growth rate of non-health employment exceeded that of health employment. Moreover, the last time this occurred was September 2000. Over 80 percent of the time since 1990, and for all of the past nearly 13 years, the growth in health employment has outpaced that for non-health employment.
Despite the relatively weaker contribution of health employment growth to the current recovery, the health sector share of total employment is equal to 10.71 percent as of July 2013, barely below its all-time high rate of 10.73 percent, first reached in December 2012.
Note: This posting, an earlier version of which was published on October 16, 2012, has been revised and updated to reflect more recent data describing the current economic expansion.
Republished with permission of the Altarum Institute.