The Government-Spending Jobs Boom

Most new jobs are in healthcare, government and social assistance

WSJ editorial. 

"Friday’s labor-market report for April showed employers continue to add jobs, albeit at a slower pace. Most notable was that more than half of the new jobs last month were in government, healthcare and social assistance. Government spending is conjuring job growth, but they aren’t the kind that add to long-term productivity growth.

The unemployment rate ticked up 0.1 percentage point to 3.9% in April while payroll jobs increased 175,000. The latter was less than economists had predicted, and job growth was revised down by a combined 22,000 for March and February. Average hourly earnings climbed 0.2% in April, a slower rate than the 3.9% over the last year.

All of this suggests an easing labor market, which is why stock prices jumped. Markets are betting that a slowing economy will spur the Federal Reserve to cut interest rates sooner rather than later. Maybe. But there’s still plenty of fiscal stimulus coursing through the economy, which is evident by the boom in jobs that depend on government spending

Government, healthcare and social assistance accounted for about 95,000 of last month’s new jobs. Over the last year these industries have made up nearly 60% of the country’s 2.8 million in job growth. They made up less than 30% of the new jobs during the first three years of the Trump Presidency before the pandemic.

President Biden boasts that he’s leading a U.S. manufacturing comeback. But manufacturing has added a mere 20,000 jobs over the last year. That’s a fraction of the number in healthcare (765,000), government (618,000) and social assistance (257,000). At the same time, employment in mining and transportation and warehousing has been flat.

Leisure and hospitality has added roughly 408,000 jobs over the last year, but only 5,000 in the last month. Most of these jobs are also part-time. While leisure and hospitality jobs have finally surpassed pre-pandemic levels, the total hours worked in the industry hasn’t. While there are more jobs, employees are working fewer hours.

In many states run by progressives such as Oregon, California and Illinois, government, healthcare and social assistance account for more than all of the net new jobs. That means those states are losing jobs in other industries. Illinois has added about 52,000 jobs in government, healthcare and social assistance over the last year—about double the number of its overall new jobs. Oregon has lost about 2,000 jobs on net but has added 24,000 new ones in these industries.

Most states and localities continue to burn through federal pandemic largesse, which is helping support the labor market. Despite the end of the pandemic emergency a year ago, Medicaid spending continues to climb—4.4% in the last six months alone. That spending pads the number of new healthcare jobs. So do other transfer payments, many of which are increased with inflation.

A nation with an aging baby boom generation will naturally need more healthcare and social-welfare jobs, such as home health workers. These aren’t bad jobs—any honest work is good work—and often they fulfill a social and market need. But jobs that rely on transfer payments from government aren’t the kind of investment-based jobs that will create new products or productivity gains that add to national wealth.

Annual federal budget deficits of nearly $2 trillion also aren’t sustainable over the long term. Sooner rather than later, the U.S. will need an investment-based boom in the private economy to finance all of these government-financed jobs."