Is There Really Any Private Sector Job Growth?

The February employment report elicited a sigh of relief as the unemployment rate held steady at 9.7%. The conventional wisdom seemed to be that we dodged a bullet given the horrible weather during the month and that with the onset of Spring and census worker hiring, the numbers might start looking better.

All of this parsing of month-to-month changes in the rate is of course nonsense given the fallibility of the government’s methodology. Trends and the composition of the numbers are what count. So this weekend I went looking among the blogs for a little more meat. As usual, Jake at EconompicData.com provided it. Here is a graph he posted:

He labeled this “the long term horror.”

He also had another which focuses in on a shorter time span:

He refers to this as the “signs of life.”

It doesn’t take a genius to figure out that private sector job growth has been nonexistent for the past year. Only government or those sectors that rely disproportionately on government financing have shown any signs of life. As for the second graph, if you find comfort in it despite the short time series it encompasses then more power to you.

It would be easy to dismiss a lot of this as dislocations brought about because of the recession, and therefore likely to be self-correcting. Hence, the temptation to emphasize the second graph. But let’s revisit Michael Mandel’s charts on private sector job growth over the past ten years:

So what we really have here is a long-term trend of vanishing private sector employment in this country which was exacerbated by the recession. The bounce back that Jake’s second graph seems to indicate would seem to be a recovery from unsustainably low numbers of jobs in certain sectors and most likely not the beginning of sustained job creation in those industries.

To the extent that trend continues, we might well be deceived as to the long-term trends in private sector employment. Short-term recovery might look like a reversal of trend when in fact it is only taking us back to an unsustainable status quo.