Health Care Displaces Manufacturing as Tops in Jobs Under Obama

On Friday, the Labor Department reported that the economy gained just 38k jobs in May, far below economists’ expectations. Worse, the Feds revised estimates of job gains in the previous two months down, wiping 59k jobs off the labor rolls.

The unemployment rate fell, however, to 4.7 percent as thousands of frustrated workers left the labor force.

The May jobs report, which was worse than the most pessimistic predictions, put many economic observers in a dark mood — at least until the next jobs report in about four weeks. The ups and downs of the monthly jobs report, while important for the markets and architects of Federal Reserve policy, obscure a more fundamental shift in the labor force since Obama took office.

Higher-paying manufacturing jobs are shrinking relative to the economy, while jobs in health care, retail trade, and hospitality are growing quickly.

When Obama took office in 2009, manufacturing jobs were the biggest component of the private sector job market. In January 2009, almost 20 million Americans worked in jobs that built, bolted, or dug things out of the ground. The recession was nearing its worst, but almost 18 percent of all private jobs were engaged in manufacturing or building things.

Today, just 19.6 million Americans have jobs in this sector, significantly lower than 2009, even as the overall private job market has expanded by 8 million, or seven percent. Just over 16 percent of all private sector jobs are now engaged in the value-added work of making things.

At the same time, jobs in health care, education, and social services have exploded. When Obama took office, just over 19 million Americans worked in this sector. Today, almost 23 million do. The health care sector has grown from 17 percent of all private jobs to 19 percent.

For the first time in our nation’s history, employment in health care and education is greater than manufacturing. We are less a country that builds things and more a country that bandages up people.

Professional and business services have also displaced manufacturing in the jobs pecking order. In 2009, private sector service jobs were the third biggest component of the job market, employing around 15 percent of the labor force. Today, the sector employs 17 percent of all private sector workers.

In January 2009, the top three sectors for jobs were manufacturing, healthcare, and business services. Today, it is health care, business services, and manufacturing. Retail and hospitalities jobs also exploded over the last seven years, while financial services and information technology declined.

The information and technology revolution may get a lot of press, but it doesn’t create a lot of jobs. In 2009, 2.8 million Americans were employed in this sector, but only 2.7 million work in it today.

The shift in the make-up of the workforce isn’t simply an interesting anthropological development. Average pay in the manufacturing sector is higher than the national average and much higher than the health care sector. The average weekly pay of a manufacturing worker is almost 30 percent higher than a worker in health care.

Health care workers earn about five percent less than average private sector workers. Workers in the hospitality sector, though, earn about 57 percent less, while those in retail earn about 38 percent less.

If manufacturing and health care workers were employed at the same levels they were when Obama took office, there would be more than two million more factory workers and almost three million fewer health care workers. The increase in overall personal income would be significant.

One way to measure the economy is by the sum total of jobs. If people aren’t working, they don’t have the money they need to live, consume, and better their lives. The types of jobs they have, and the pay that goes with those jobs, is also important, though. Since Obama took office, retail and hospitality have added 3.5 million jobs, while manufacturing has shrunk by 200k.

Manufacturing was the number one sector for private jobs in 2009. Today, it is the third biggest sector. A great deal of the stagnant economy for the last seven years can be explained by that single fact.


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