Health care, food service, and government jobs

For some time now, steady employment growth in the health care, food service, and government categories within the monthly report from the Labor Department has been a great source of interest here - clearly, it was time to whip up a chart or two.
Note the area circled in red. During the second quarter it was a close call, but in the third quarter of 2007, for the first time in at least a decade (maybe, much longer as data prior to 1998 was not reviewed) there was positive overall job growth with all of that growth attributable to three employment categories:

• Education and health services
• Food service and drinking places
• Government (Federal, State, and Local)

All other categories netted zero job growth in the third quarter - the major factors were hefty declines in both construction and manufacturing offsetting gains in both trade and professional services.

While job growth near 100,000 per month during the last three months is certainly better than no new jobs at all, one has to wonder what implications this new mix of job creation holds for the future.

Many hailed Friday's strong labor report as a sign that "all is well" in the U.S. economy - jobs are being created, incomes are rising, and it's safe to buy stocks again. But can an economy so highly dependent on new jobs to care for sick people, serve overweight people, and add to government bureaucracy educate a growing population really be a sign that all is well?

When looking at just these three categories as shown in the chart below, strong hiring is clear to see for education and health care - overall employment gained 292,000 during the third quarter and 167,000 positions were created in this category alone. As noted in a BusinessWeek cover story some time ago, health care has been a powerful source of job creation, particularly since the beginning of the decade.

Government jobs too have been plentiful save for two quarters of sharp cutbacks in 2001 and 2003, but, more importantly, the recent increase in waiters, hostesses, cooks, and busboys has been rather astonishing.

Even at the height of the internet boom, only about half as much restaurant help was being added as that seen during the last few years. Surely, the newfound popularity of dining out is a testament to the power of the housing boom and the "wealth effect" that it spawned - given the ubiquitous "HELP WANTED" signs that persist to this day, this habit does not appear to be fading nearly as quickly as home prices are now fading in many parts of the country.

This can't be a sign of a healthy economy (or a healthy populace given that food portion sizes have become as inflated as home prices).

If these three sectors contributing all of net job growth over the last three months were to be an indication of a healthy economy, then the source of the funds ultimately used to pay the salaries of all these new workers would be an important question to ask.

Just where does all the money come from?

Other countries may want to copy the U.S. model and, presumably, they would be interested to know how this all gets paid for.

All is not well in the labor market.