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Which Parts of the Economy Are Creating Jobs?

David Godow
January 3, 2011, 10:05am

Though the U.S. economy has 7.48 million fewer jobs today than in early 2007 and unemployment has remained close to 10 percent, employment is up 1.1 million from its December 2009 trough. The Obama Administration has credited its stimulus plan with "creating or saving" over 2 million jobs, but employment figures suggest this nascent has growth has been in those parts of the private sector that the government has ignored.

% change in employment by sector of the economy, 2007-present

As the above graph demonstrates, job creation has been concentrated in the education and health services and general business services sectors. Both are up around 2 percent from last year. Interestingly, the former was the one major sector of the economy not to slip into negative job growth during the recession. Temporary workers, omitted from this graph to preserve the scale, are up a whopping 20 percent over their late 2009 total.

Interestingly, sectors that benefited from stimulus-funded projects, such as construction, have not seen the same kind of growth. Construction, for instance, which has benefited from several government attempts to juice housing demand, has not seen a single quarter of job growth since before the recession.. And after stimulus funds for state and local governments came to a halt this year, employment growth in the public sector rapidly turned negative.

Supporters might argue that the stimulus staved off worse job cuts in affected industries and, through the Keynesian multiplier, increased job growth in non-stimulated sectors of the economy. Still, these numbers suggest that the Administration's attempts at spurring job creation may operate under mistaken notions of what sectors of the economy will drive growth in the modern economy.

It's uncertain what course job growth will take in 2011, but it seems clear that a realignment of resources in the economy is taking place. Firms, especially in manufacturing, are increasing productivity with newly-streamlined workforces. Old mainstays of the post-war industrial economy continue to shrink, even as the private service sector leads the way in post-recession job creation. The best policy for the government at this point would be to let that adjustment happen without further knee-jerk support for the Administration's favorite sectors of the economy.


David Godow is Research Assistant


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