Working for the Man - US Labour Market Outlook

Marcus Tuck

President Trump recently claimed he will be “the greatest jobs producer that God ever created”. Economists debate how much presidents actually influence job creation and President Trump is coming into office at a time when the US economy is already close to full employment in the opinion of the US Federal Reserve. Manufacturing jobs seem to figure highly in the President’s rhetoric, even though manufacturing only represents about 12% of US GDP. In 2016, the healthcare and social assistance sectors accounted for a quarter of the total 2.2 million additional jobs created in the US, and that trend looks set to continue. In a recent report, the US Bureau of Labor Statistics makes projections for US employment, which we detail in this article.

In a recent report, the US Bureau of Labor Statistics (BLS) makes the following projection for US employment prospects between 2014 and 2024: “Service-providing sectors are projected to capture 94.6% of all the jobs added between 2014 and 2024. Of these 9.3 million new service sector jobs, 3.8 million will be added to the healthcare and social assistance sector, which is expected to become the largest employing major sector, overtaking the state and local government sector and the professional and business services sector.” The BLS’s projections can be seen in the chart below.

The top three job-creating sectors are expected to be personal care aides, registered nurses and home health aides, of which the first and the third require no formal education credentials, says the BLS.

They are not necessarily the jobs that President Trump has in mind when he talks about “making America great again”. If the phrase means bringing back the low-skilled manufacturing jobs of yesteryear then that is not going to happen, no matter how much the President cajoles manufacturing companies. As a recent Financial Times article points out, the main reason is not globalisation but the fact that rich-country manufacturing is technologically so advanced that it does not need many workers, especially not those with little education, to produce the output.

That entails a rather stark truth about what is needed to reverse the US’s extraordinary fall in male employment rates: more men, in particular more unskilled men, must be willing to take jobs not just in services, but in service jobs traditionally occupied mostly by women. The New York Times recently compared the professions expected to add the most jobs in the years ahead with the gender balance among their workers now. The article showed that the bulk of new employment opportunities will arise in “pink collar jobs” – those which have a majority of female workers. What this means is that remedying the malaise of the “left behind” will require not just better economic policies but profound cultural change. The occupations where most of the job opportunities are/will be require caring and communicating rather than working with big machines.

While the structural change in the type of jobs needed is fairly similar across most countries at similar levels of development as the US, some other advanced economies (particularly in Europe) seem to handle the cultural readjustment with greater ease. Most of them also manage to employ significantly more of their working-age women than the US does – particularly where a rich country has put in place arrangements that make it easier for women to combine work and childrearing.

Based on the BLS’s forecasts, US manufacturing employment between 2014 and 2024 is projected to decline at a 0.7% rate annually, a more moderate decline than the 1.6% rate experienced in the prior decade. Construction is projected to add 790,400 jobs by 2024. Even with these additional jobs though, employment in the construction sector is not projected to return to the 2006 peak.

The future will bring new jobs that we can only guess about now. The dynamism of US technology companies in particular should be on display again this profit report season, as it was last year. America is already great for most skilled workers. Making America great again for the “left behind” will be more about cultural change than it will be about misguided protectionist policies.

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Marcus Tuck

Responsible for identifying domestic and international equity investment opportunities. 25 years of financial markets experience as an equity strategist, economist, analyst, portfolio manager and consultant.

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