November 23, 2019
In September 2018, the United States unemployment rate fell to 3.7%, the lowest rate since 1969.
Five decades ago, the unemployment rate was low due to the Vietnam War, since conscripted men were counted as outside of the labor force. Today, the causes of low unemployment are due to a variety of causes, including a sustained recovery from the Global Recession, global growth, sweeping changes to the U.S. tax code, and the exclusion of the long-term unemployed from this metric.
Of course, low unemployment isn't all good news: for one thing, it can contribute to inflation, since more competitive labor markets can lead employers to raise wages. In fact, concern about this relationship (called the Phillips Curve) has led the U.S. Federal Reserve to raise interest rates nine times since 2015. Another consequence is that with more than a million open jobs and no one to fill them, employers are facing "worker deserts," something manufacturing and construction are especially hit hard by.
In last month's jobs report, the Department of Labor reported that 128,000 new jobs were added to the U.S. economy in October. Since not all jobs are created equal, we were interested to see what these new positions are. Is increasing employment benefiting everyone, or just those in high-paying jobs? Are these new jobs stable and high-paying, or are they short-term gigs?
Which sectors are growing?
To answer this, we extracted employment data from the U.S. Department of Labor Statistics and analyzed the changes in employment over the last six years.
We find that between 2012 and 2018, a total of 15.4 million new jobs were created and 914,890 jobs were lost. Half of all jobs created in this time period were in the following six sectors: food services and drink places; professional, scientific, and technical services; social assistance; administrative and support services; ambulatory health services; and specialty trade contractors.
The sector with the single largest job growth was food services and drinking places (accounting for 13% of jobs created), about half of which were fast food and counter workers, waitresses, and waiters. Coming in second was the professional, scientific and technical services sector (almost 9% of new jobs), where job growth was driven by software developers, programmers, and computer and information analysts (173,510 new jobs).
Other important sectors were social assistance (including 866,380 new jobs for personal care aides) and administrative and support services (driven by the 395,720 new jobs for hand laborers, material movers, and customer services representatives), together accounting for about 16% of all new jobs.
Healthcare also experienced growth, with 246,120 new nursing and health aid jobs and 130,920 jobs in healthcare support jobs.
Finally, more than one million jobs were created in the specialty trade contractors sector, particularly for electricians, construction laborers, pipelayers and plumbers, carpenters, and HVAC mechanics and installers.
Which sectors are shrinking?
Several sectors lost jobs in this period. Between 2012 and 2018, more than one-third of all jobs lost were in just one sector: the wholesale electronics sector (these lost jobs were primarily sales representatives). An additional 71,100 jobs in the funds, trusts, and other financial vehicles sector were lost, mostly among secretaries, administrative assistants, accountants, auditors, and office clerks, perhaps due to a shift toward web-based and automated financial management.
Some sectors with job losses seem to be driven by outsourcing, including 105,720 jobs lost in the tellecommunications sector (mostly customer service jobs), 56,250 jobs lost in computer and electronics manufacturing, and 36,370 jobs lost in apparel manufacturing. Others may be driven by changes in energy and natural materials production, with 131,240 jobs lost in the oil and gas, mining, and mining support sectors.
Big changes by sector
The largest sectors are typically where most job growth happens. To see where sectors are experiencing the most dramatic changes, we evaluated the proportional growth in the number of jobs (instead of just total number of jobs).
Using this method, we find that the construction sector has grown the most, with nearly 4.2% job growth from 2012-2018. The arts entertainment, and recreation sector and the the transportation and warehousing sector both grew by more than 3%.
Job growth by sector, United States (2012-2018)
Three sectors were major drivers of job growth, both in job numbers and as proportional growth: health care and social assistance (3.3% growth), accommodation and food (2.9%), and professional, scientific, and technical services (2.7%).
Notably, the mining, quarrying, and oil and gas extraction was the only sector to experience job growth in this period, declining by 2.5%.
What about pay? Job creation and salary
The average annual salary in the U.S. in 2018 was $54,459 (median was $44,640).
Overall, job creation was in lower-paying jobs: about two-thirds (64%) of the jobs created in 2012-2018 were in sectors that pay less than the national average. The food services and drinking places sector, which experienced the largest job growth in this time period, had an average annual salary of $25,920 in 2018. Within this sector, the majority of new jobs were for fast food and counter workers, paying just $21,790 in 2018.
Jobs as personal care aides (within the social assistance sector), which increased by an astonishing 304% between 2012 and 2018, paid an average of $25,460.
Similarly, job growth in the administrative and support services sector was primarily among relatively low-paying jobs: hand laborers and material movers ($26,820), customer service representatives ($32,290), and grounds maintenance workers ($31,430).
Two high-paying sectors did experience job growth. The sector of professional, scientific, and technical services saw large job growth for software developers and programmers (average annual salary of $103,650 in 2018) and computer and information analysts ($99,220).
The ambulatory health care services sector, with a sector-wide average annual salary of $63,110 (2018), also experienced large growth. However, the majority of new jobs were in comparatively low-paying positions, with one-quarter of new jobs being health aides (making an average of $25,980 in 2018) and healthcare support occupations ($36,500). Registered nurses ($72,230) and physicians and surgeons ($234,120) accounted for 8% and 2% of job growth in this sector, respectively.
Job growth and annual mean salary (2012-2018)
Industry Supersector
- Construction
- Trade, Transportation, and Utilities
- Education and Health Services
- Financial Services
- Leisure and Hospitality
- Information
- Professional and Business Services
- Other Services (except Public Administration)
- Manufacturing
- Natural Resources and Mining
By contrast, sectors that shrank in this time period were generally high-paying, with 84% of job loss happening in sectors paying above the national average. Sales representatives in the wholesale electronics sector, the largest single category of job loss, made an average of $83,840 in 2018.
Customer service representatives in the telecommunications sector made an average of $43,090. Within the funds, trusts, and financial vehicles sector, jobs as secretaries and administrative assistants ($48,380 per year) and accountants and auditors ($90,190) experienced large losses.
Other high-paying sectors that shrunk between 2012 and 2018 were support activites for mining (sector-wide annual salary of $58,480), computer and electronic product manufacturing ($80,760), and federal, state, and local government ($52,660).
What does it all mean?
Employment data tell an important story of the future of American employment. We see the decline of sectors that have become outsourced or outdated: electronics and clothing manufacturing, and customer service. Natural resource mining jobs are declining, particularly in mining and oil and gas extraction.
The majority of jobs created are in the direct service industry, many of which are not well-paying: waiters and waitresses, fast food workers, personal care aides, and administrative jobs. One notable exception is software engineers, a job area that has both increased considerably and pays well above the U.S. average.
Although this analysis focuses on just a few recent years, these trends do reveal a shift in U.S. employment from higher-paying jobs in the production sector and into lower-paying job in the service industry. These findings suggest that a myopic focus on the unemployment rate as a primary metric may miss a broader and important story about the overall health of employment in America.
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