Where are tomorrow's jobs going to come from? The question is more urgent than ever, with official unemployment hovering around 10 percent and with nearly one in five Americans unemployed, if you count part-time workers who want full-time jobs and people so desperate that they have given up looking for work entirely.
Most popular discussion about jobs focuses on the effects of offshoring of manufacturing jobs to China and other countries, many of which, like China, manipulate exchange rates and use subsidies to promote their industries. Combating predatory trade practices and rebalancing global trade by means of higher U.S. exports is important, in the short and medium term. But in the long run technologically driven productivity growth is the most important factor in shaping employment in the U.S. and every country in the world.
Productivity growth substitutes machinery or more efficient techniques for physical labor (engines) and mental labor (computers). Even if the U.S. had a completely closed economy, over time inventors and investors would figure out ways to replace people with machines.
Since the beginning of the industrial revolution more than two centuries ago, sectors that have adopted labor-saving machinery have shed labor to other sectors. The mechanization of agriculture and mining -- "primary production" -- freed up labor for factories. Increasing productivity in the "secondary production" like manufacturing, by allowing one person with advanced technology to do the work of dozens, freed up workers who were then employed in "tertiary production" -- office work and business services that support primary and secondary production. Thus the evolutionary progression, from yeoman farmer to factory worker ... to Dilbert in his cubicle.
With the ruthlessness of Skynet in "The Terminator," computerization in the tertiary sector is now committing mass Dilberticide, replacing receptionists with automated phone systems and travel agents with services like Priceline. The emptying of the cubicles won't result in permanent mass unemployment, the present prolonged crisis notwithstanding. As it has always done in the past, labor will shift from more mechanized to less mechanized sectors. But what will those jobs be?
We already know the answer.
The most numerous and stable jobs of tomorrow will be those that cannot be offshored, because they must be performed on U.S. soil, and also cannot be automated, either because they require a high degree of creativity or because they rely on the human touch in face-to-face interactions. The latter are sometimes called "proximity services" and they include the fastest-growing occupations, healthcare and education.
Most job growth in the last decade has been concentrated in three sectors: healthcare, education and government, mostly state and local government. Since the recession began, healthcare has added 559,000 jobs. Even more remarkable, the average monthly gain of 22,000 jobs during 2009 has been only slightly lower than the average increase of 30,000 jobs a month in 2008.
Last July, in a study titled "Preparing the Workers of Today for the Jobs of Tomorrow," the Council of Economic Advisers predicted that between 2008 and 2016 employment will decline in manufacturing, retail and wholesale, business and financial services and other sectors. Public-sector employment will remain steady, and there will be growth in transportation and utilities and construction. The greatest job growth, according to the White House, will be in the health and education sectors. Healthcare-related jobs make up seven out of the 20 fastest-growing occupations, and 14 out of the 20 fastest-growing jobs. The fastest-growing occupations are home health aides and registered nurses.
The aging of the boomers accounts for only 10 percent of the growth. The rest comes from increasing demand. That's because productivity growth in agriculture, construction and manufacturing has greatly reduced the cost of food, shelter and appliances. In the U.S. and similar nations, the freed-up income tends to be used on quality-of-life goods, of which healthcare is the most important. So-called ambulatory healthcare services, defined as healthcare provision for people who do not need to be hospitalized, form the fastest-growing part of the healthcare field. This underlines the point: As other expenditures are reduced, Americans are spending more income on non-emergency healthcare, a superior good that makes it possible to enjoy the other goods of life all the more.
It's true that the U.S. needs to reduce unnecessary health cost inflation. Paradoxically, however, a more efficient healthcare sector is likely to hire more, not fewer, people, if tasks that are now carried out by highly paid doctors are allowed to be performed by nurses and home health aides. Two Stanford economists, Robert E. Hall and Charles I. Jones, have predicted that even if healthcare is delivered in the most efficient possible way, Americans are likely to seek to devote "30 percent or more of GDP on health by the middle of the century."
The healthcare sector as a whole should not be considered a drag on the real or productive economy. On the contrary, while employment in manufacturing is declining overall, employment in pharmaceutical and medicine manufacturing in the U.S. is expected to expand. In the words of the economist Robert Fogel, "Just as electricity and manufacturing were the industries that stimulated the growth of the rest of the economy at the beginning of the 20th century, healthcare is the growth industry of the 21st century. It is a leading sector, which means that expenditures on healthcare will pull forward a wide array of other industries, including manufacturing, education, financial services, communications and construction."
Another widespread myth holds that most Americans need to go to college in the future. In reality, most of the fastest-growing jobs, including those in healthcare, do not require a four-year bachelor's degree. According to the Council of Economic Advisers: "The categories with some education required beyond high school are growing faster than those not requiring post-secondary schooling. The growth is not solely among occupations requiring bachelor's degrees; occupations that require only an associate's degree or a post-secondary vocational award are actually projected to grow slightly faster than occupations requiring a bachelor's degree or more." The appropriate public policy response is not necessarily to send more Americans to expensive four-year colleges, particularly if that means crippling burdens of personal debt in the form of student loans. We need to expand the vocational training provided by the community college system.
None of this means that we don't need world-class scientists and engineers, or that we don't need to rebuild our manufacturing export industries, or that we don't need to hire people to design and build up-to-date infrastructure and energy systems. High-tech agriculture, manufacturing and infrastructure and related business and professional services will remain essential to economic dynamism. But thanks to ever smarter machines, fewer and fewer people will work in the primary (field), secondary (factory) and tertiary (office) sectors. Most of the job growth will be in the "quaternary" sector of healthcare and other qualify-of-life services.
Dilbert's days are numbered. Look for Dilbert Jr. at the nursing station.
One of the frustrations of being a progressive is that the bar to clear for public support seems to be asymmetrically higher for progressive agenda items than conservative agenda items. More than anything else--the bias of the media, think tanks or other institutions, which is a related and relevant element--the political reality that less support is needed, say, to pass a tax cut for rich people or start a war than is needed to expand health care coverage or raise the minimum wage, testifies to the fact that the political system is generally skewed against progressive reforms.
And so it is with climate change. The USA Today reports today that Americans by a 17-point margin, 55 percent to 38 percent, support a global treaty to deal with climate change. In a democracy, no less one where Democrats control the entire federal government, that ought to be enough to political capital to get such a treaty done--and benefit politically, to boot. But I harbor no illusions that that 17-point margin translates directly into political victory the way that, say, a 17-point margin in favor of sending everyone in America a $300 tax rebate check or a 17-point margin in favor of the gun show loophole might.
Why? Because, obviously, entrenched and largely conservative powers in Washington rely on the fact that majorities can be thwarted. And they will no doubt continue to frame climate change actions as inimical to economic progress. Indeed, the same USA Today poll gives them ample fodder: by a 7:1 ratio Americans think the Obama administration should be focusing on the economy, not climate change. Economic progress and climate protection are not mutually-exclusive choices. And though I realize that the resources like time, attention and political capital that the president and his staff can actually invest in the economy and the environment are mutually-exclusive, you can be sure that calls to "focus on economy" will be used as a convenient distraction for climate change-deniers and others who oppose serious enviro reform.
In any case, this continues to be a teachable moment in which the Obama Administration, the Democratic Congress, Republicans who understand that climate change is real, and all others of good faith must continue to stress that the improving the economy and protecting the environment are not mutually-exclusive public agenda options. What saddens me is that Al Gore and others were having a much easier go of this process of public education before the economy went in the crapper. Teachable moments are tough enough in good times, but they are even harder when people are struggling to make their monthly payments. In that sense, the sad reality is that Obama's first summit in Copenhagen came at a bad time for the environment because it's a bad time for the domestic and global economies.
Still, it's encouraging to see that 55 percent figure. It's something to work with--and to point out repeatedly to critics of reform and climate change-deniers.
So Barack Obama, asked by pal Oprah Winfrey to issue himself a first-year grade as president, gave himself a B+. I'm a college professor and he's a former one, but we all know that a B+ indicates a solidly above average, if imperfect, performance. (Although with rampant campus grade inflation, a B+ isn't as far above average as it used to be.)
Passage of health care reform would boost his grade to an A-, he said. Until Americans get back to work, he said, "I can't give myself the grade I'd like."
One wonders who would issue Obama the same grade. Liberals would almost certainly mark him down for his long-awaited, hemmed-and-hawed over decision to send 34K more troops into Afghanistan, for being less than vigilant about the public option, and for being too cozy with Goldman Sach and other Wall Street types. Not sure if our own Glenn Greenwald is going to pipe up, but I'm guessing Glenn would issue a grade somewhere south of B+. Likewise for Jane Hamsher or Matt Taibbi or other leading left lights too numerous to list here.
Then there are the conservative, and well, fugettaboutit. Looks like they already found their way to the Daily News link provided above, and over to the right column where they ask readers to issue their own grades. As of this writing, 53 percent of these non-scientific, self-selected respondents issued Obama an "F."
African-Americans? I suppose if the tug of identity politics is as strong we suspect, there are plenty who would give Obama a B+ or higher. As the president's poll numbers continue to steadily slide lower, you have to believe African-Americans are standing fast with Obama as the core of his approval number.
The point is, very few Americans would probably give Obama a B+. And even if that were the average year-end grade, the distribution would probably be very bimodal. Whatever the case, as the president admits, he's gonna need to hit the books a little harder on jobs in the next 11 months than he did in the first 11 months if he hopes to limit the electoral damage congressional and other down-ballot Democrats suffer come November.
Barack Obama is trying once again for balance. On the one hand, he wants enough government spending to offset the timid spending of consumers and businesses. Otherwise, the jobs and wage recession could drag on for years. On the other hand, he doesn't want to set off more alarm bells about the budget deficit. Otherwise, conservative Democrats might join forces with Republicans to block heath care. So what does he do? A little bit more stimulus spending, but stimulus spending that doesn't look like more stimulus because it's not really adding to the deficit. It's coming out of savings from money already authorized to be spent on the bank bailout. Hmmm?
No president in modern times walks a tightrope as exquisitely as this one. His balance is a thing of beauty. But when it comes to this economy right now -- an economy fundamentally out of balance -- we need a federal government that moves boldly and swiftly to counter-balance the huge recessionary forces still at large.
States and cities, for example, are estimated to be $350 billion hole this year and next. They can't run deficits so they're wildly cutting spending, cutting jobs, cutting contracts, and raising taxes and fees. That's a huge anti-stimulus package roughly as big as the remaining direct spending in the old federal stimulus package. Which means, Obama's "new" stimulus, announced today, is about all we have, and it's not nearly enough.
The word in Washington is we're out of the woods. The rate of unemployment dipped from 10.2 percent in September to 10 percent in October. In our nation's capital, a one-month trend marks a turnaround. Don't believe it for a moment. The real story of October was the increasing number of Americans who dropped out of the labor force, too discouraged even to look for work.
Main Street is hurting worse than ever. Ten percent unemployment translates into roughly 18 percent of our workforce unemployed or underemployed. Housing markets are in terrible shape: One quarter of homeowners are paying more each month than their houses are worth; the rates of tardy mortgage payments continue to rise. Thirty percent of American households contain someone who has lost a job and can't find another, and yet almost all households are dependent on more than one wage earner in order to make ends meet. A quarter of all American children are now dependent on food stamps.
There is no reason to tolerate this degree of misery. We know exactly what to do. The government has the fiscal tools to do it. Start by bailing out state and local governments. (If Congress would prefer to call it a loan and require payback over the next five years, fine.) Renew unemployment and COBRA benefits. Increase federal spending on infrastructure. If we have to, hire people directly. The package should be $400 billion over two years.
We don't know exactly how much the President is proposing to spend, but sources tell me it's in the range of $70 billion, redirected from the $200 billion in TARP savings. The President's small, calibrated attempt to balance a stimulus with deficit reduction will in fact make the deficit worse over the long haul. It postpones the day when we're back to near full employment, when almost all Americans who need a job get paychecks on which they pay taxes. This isn't really balance at all. It prolongs the economic imbalance.
Brad DeLong and FireDogLake are both highlighting an exchange between Robert Kuttner and President Obama yesterday that is worth echoing far and wide... but only if you are interested in a thoughtful and nuanced look at the economic policy challenges faced by the United States right now.
ROBERT KUTTNER: You know, most of the things that have been proposed today cost money, and there is this concern about the federal deficit. I hope that your administration will recognize, as I know you will, that it's possible, first of all, to reduce the deficit over time and sometimes in the short run realize that you need to increase the deficit. And I hope the concern about the deficit in the long run doesn't crowd out the need for additional spending in the short run. And I also think that some of these programs that increase jobs and increase GDP are probably the fastest way to get the economy back on a track that will reduce the deficit over time. It's certainly a better way to reduce the deficit than putting ourselves into a -- into a debtor's prison and assume we can deflate our way to recovery.
BARACK OBAMA: Well, I think this is an important point. You know, we've been talking a lot about specific initiatives. There is a macroeconomic element to this whole thing. And so let me just amplify what was just said.
We have a structural deficit that is real and growing, apart from the financial crisis. We inherited it. We're spending about 23 percent of GDP and we take in 18 percent of GDP and that gap is growing because health care costs, Medicare and Medicaid in particular, are growing. And we've got to do something about that.
You then layer on top of that the huge loss of tax revenue as a consequence of the financial crisis and the greater demands for unemployment insurance and so forth. That's another layer. Probably the smallest layer is actually what we did in terms of the Recovery Act. I mean, I think there's a misperception out there that somehow the Recovery Act caused these deficits.
No, I mean, we had -- we've got a 9-point-something trillion-dollar deficit, maybe a trillion dollars of it can be attributed to both the Recovery Act as well as the cleanup work that we had to do in terms of the banks. In turns out actually TARP, as wildly unpopular as it has been, has been much cheaper than any of us anticipated.
So that's not what's contributing to the deficit. We've got a long-term structural deficit that is primarily being driven by health care costs, and our long-term entitlement programs. All right? So that's the baseline.
Now, if we can't grow our economy, then it is going to be that much harder for us to reduce the deficit. The single most important thing we could do right now for deficit reduction is to spark strong economic growth, which means that people who've got jobs are paying taxes and businesses that are making profits have taxes -- are paying taxes. That's the most important thing we can do.
We understand that in this administration. That's not always the dialogue that's going on out there in public and we're going to have to do a better job of educating the public on that.
The last thing we would want to do in the midst of what is a weak recovery is us to essentially take more money out of the system either by raising taxes or by drastically slashing spending. And frankly, because state and local governments generally don't have the capacity to engage in deficit spending, some of that obligation falls on the federal government.
Having said that, what is also true is that unless businesses and global capital markets have some sense that we've got a plan, medium and long term, to get the deficit down, it's hard for us to be credible, and that also could be counterproductive. So we've got about as difficult a economic play as is possible, which is to press the accelerator in terms of job growth, but then know when to apply the brakes in the out-years and do that credibly. And you know, we are trying to strike that balance, but we're going to need help from all of you who oftentimes are more credible than politicians in delivering that message.
Because we want to leverage whatever public dollars are spent, and we are under no illusion that somehow the federal government can spend its way out of this recession. But it is absolutely true that any of the ideas that have been -- been mentioned here are still going to require some public dollars, and those are actually good investments to make right now.
Like many Salon readers, I feel a great deal of anxiety about where the U.S. is headed, and there have been many disappointments in this first year of the Obama presidency. But I really can't think of anything I'd rather have confronting our challenges than the guy who spoke the words above yesterday.
Before the Bureau of Labor Statistics released the non-farm payroll report for November this morning, you didn't have to look hard to find headlines like "Jobs Report Has Market On Edge." In part this was due to a not very encouraging private sector labor report released on Wednesday, but the anxiety also had its roots in a mysterious comment made by White House Press Secretary Robert Gibbs on Thursday.
"One payroll estimate came out ... yesterday and it seemed to suggest that [the unemployment rate] might tick upward."
At Capital Gains and Games Pete Davis offered some context for this remark.
Every year or so, at the request of clients, I talk to Administration officials about when they receive advance economic data. The uniform answer is that the Fed Chair and the Chair of the Council of Economic Advisers receive the data at 5 p.m. the night before and that the CEA Chair writes a short memo to the President and a few senior officials, which is conveyed between 5:30 p.m. and 7 p.m. depending upon what else is going on. A few key congressional staff get briefed a few minutes ahead of the 8:30 a.m. release, but they are sequestered with no means of communication until then.
Gibbs is far too professional a communicator to make an off-hand comment like that without being prompted. My guess is that White House National Economic Council Director Larry Summers put him up to it with the President's assent and that this was done without knowing the unemployment number in advance. They suspect tomorrow morning's number will be higher, and they want to diminish the political impact. If they're wrong, it won't hurt them.
I'm not sure that I fully understand Davis' post. On the one hand he suggests the president had been given a heads up on the new numbers, but on the other he says that the directive to Gibbs was made "without knowing the unemployment number in advance." But whichever is true, the White House ended up seeming just as flat-footed as the consensus expectation of Wall Street analysts.
But back to the report. The top-line numbers, 10 percent unemployment, only 11,000 jobs lost, immediately goosed the stock market. But inside the numbers the news was also pretty good. The U-6 number, which measures workers who have stopped looking for work or are involuntarily part-time, dropped from 17.5 to 17.2 percent. Hours worked per week rose, suggesting that employers may soon feel pressure to hire new workers. Temp work took a big jump upward, another very positive sign suggesting economic recovery.
The main reason for caution? The monthly non-farm labor report is subject to extreme revisions in the months ahead. In this report, the BLS trimmed job losses for September and October by a significant margin: September's 263,000 number dropped to 139,000 and October's 190,000 fell to 111,000. So it is altogether possible that this month's 11,000 drop could turn out to be much worse later on.
Optimistic labor market analysts were predicting that the U.S. economy would shed at least another 100,000 jobs in November. The actual number, according to the Bureau of Labor statistics? A mere 11,000. The unemployment rate even fell, from 10.2 to 10 percent.
The numbers are a big surprise. As the BLS notes, "in the prior 3 months, payroll job losses had averaged 135,000 a month." But even such a negligible loss represents the 23 straight month in which the labor market contracted, which hasn't happened since the 1930s, so the champagne should stay in the fridge. I'll have much more analysis in a follow-up post. But for now, this is by far the best news on unemployment we've seen all year, and it raises the very real possibility that the economy could start to add jobs in December.
Bernanke's Boffo Week
Health Care: A Glass Half Full