Thursday, May 21, 2009

The End of the Private Sector Boom?

As many people work in the U.S. private sector today (on an absolute basis) as ten years ago.



This result is even more shocking when you take into account that the "working population" is about 20% larger than it was in 1999. Before we dive further into the data, lets first define what the "working population" (i.e. civilian noninstitutional population) is:

The civilian noninstitutional population consists of persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities and homes for the aged) and who are not on active duty in the Armed Forces. California is the most populous State, with about 27.9 million persons in this category in 2008; Wyoming is the least populous State, with just over 410,000 persons.
As a percent of this population, private workers ramped up from right around 38% in the early 1960's to OVER 50% as recently as the summer of 2002 (partially as a result of the two income family becoming the norm, rather than the exception). Since then, the number has dropped to just over 46% of the population.



In other words (and another way of saying the same thing); the majority of people able to work, no longer do so in private industry.



My thoughts... a large portion of the economic growth that took place over the past generation occurred because the workforce was increasing (in private industry) each year. Even if this additional employee was less productive on the margin, they built the overall economic pie. As mentioned this trend hasn't only slowed, it has reversed.

The problem (in theory) is that private workers are the true "producers" of this nation, whereas public workers tend to maintain / build the structure that lets these producers function (i.e. they provide public goods). My worry is that we lost a substantial number of these productive jobs over the past ten years to eager and willing overseas competition.

I am not implying they were "stolen", as stolen would mean we wanted them. Over the past 10-20 years Americans have willingly handed off jobs in science, manufacturing, and programming as it was seen as more exciting / easy to be a real estate agent, financier, or day trader (hey, I'm guilty!). The problem is that many of these jobs didn't truly add to the overall pie, but took away from it by adding another cost to the supply chain.

Now that asset prices aren't continuing their upward trend, we are realizing that many of these jobs may not have even been necessary. To be very draconian, the question becomes whether we are qualified to get these jobs back.

Source: BLS

Update:

Scroll up and look at the top chart, then go to The Big Picture and take a look at the leading measure of commercial real estate... that's a helluva relationship.

5 comments:

Anonymous said...

"Over the past 10-20 years Americans have willingly handed off jobs in science, manufacturing, and programming "

You mean owners have done this. No line worker decides to become a financier. His company's owner moves the plant overseas and he goes to work at Walmart.

Many young people don't go into science and programming today because they know that companies here hire h1B visa foreigners to do the work for cheaper.

Jake said...

i agree with your assessment that it was the owners of capital making the decision, but i am not strictly talking about "cheap labor" (i.e. physical factory workers) who now work at walmart.

i am talking about the educated workforce that used to go into real businesses. upon graduating business school i, like the MAJORITY of my classmates, went to work in finance rather than test my chops in corporate america.

the reason does goes back to your point and to my main concern. americans no longer have the edge globally. when we were no longer the cheapest, we became the smartest. when we weren't the smartest, we had the most flexible system for attracting new business and intellectual capital.

now? if you are a young, educated man from asia... is the U.S. still your #1 destination?

Anonymous said...

great work, thanks a lot Jake!

Anonymous said...

Are there four groups in the working population? 1)Not working by choice, 2)unemployed, 3)working in the private sector and 4)working in the public sector?

Jake said...

i would add a fifth (though i may be missing something); working in at a non-ideal job strictly to pay the bills and/or part-time when you want to work full time

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