View Full Version : What's Really Propping Up The Economy

09-17-06, 04:21 PM
What's Really Propping Up The Economy (http://www.businessweek.com/magazine/content/06_39/b4002001.htm)
September 17, 2006 (BusinessWeek)

Since 2001, the health-care industry has added 1.7 million jobs. The rest of the private sector? None

If you really want to understand what makes the U.S. economy tick these days, don't go to Silicon Valley, Wall Street, or Washington. Just take a short trip to your local hospital. Park where you don't block the ambulances, and watch the unending flow of doctors, nurses, technicians, and support personnel. You'll have a front-row seat at the health-care economy.

For years, everyone from politicians on both sides of the aisle to corporate execs to your Aunt Tilly have justifiably bemoaned American health care -- the out-of-control costs, the vast inefficiencies, the lack of access, and the often inexplicable blunders.

But the very real problems with the health-care system mask a simple fact: Without it the nation's labor market would be in a deep coma. Since 2001, 1.7 million new jobs have been added in the health-care sector, which includes related industries such as pharmaceuticals and health insurance. Meanwhile, the number of private-sector jobs outside of health care is no higher than it was five years ago.

AntiSpin: BusinessWeek has a long history of getting the economy and markets story right. And we do mean long. Here's a piece we posted February 15, 2000 to try to prod our readers into dumping their "new era" dot com and telecom stocks.
"For five years, at least, American business has been in the grip of an apocalyptic, holy-rolling exaltation over the unparalleled prosperity of the "new era," upon which we, or it, or somebody has entered. Discussions of economic conditions in the press, on the platform, and by public officials have carried us into a cloudland of fantasy where all appraisal of present and future accomplishment is suffused with the vague implication that a North American millenium is imminent. Clear, critical, realistic and rational recognition of current problems and perplexities is rare.

"Changes in the structure and processes of American industry and trade have been swift and sweeping, as the President's Committee on Recent Economic Changes has so well shown. Have these changes fundamentally altered the conditions of economic security and progress for either the individual business man or the nation? The simple truth is that we do not know. The Committee was honest and scientific enough to say so. American business should be sane and sensible enough to recognize it.

"There is not a single new and important development in our economic life in recent years of which we can confidently calculate the consequences or judge the soundness and permanence. We have seen an amazing increase in man-hour production in industry since the war, but we do not know why it took place then, or whether it was merely a resumption of a rise, quite as rapid, that had been going on for fifty years before the war. We certainly do not know how long or rapidly it can continue, or, if it does, whether and how the problems of adjusting employment and consumer purchasing power to it will be met.

"We have seen new industries rise like rockets, and old ones grow tired and die. We do not know how soon the new ones will fizzle out, or what others will take their place.

"We have seen the machinery of distribution formed and reformed into new patterns changing every day before our eyes, but no one can say precisely where they leave the consumer and the independent enterpriser, or whether they will fundamentally alter the costs of distribution or mitigate the rigors of commercial competition.

"We have seen security prices soar out of sight of earnings, brokers' loans swell till they absorb a third of the banking resources of the country, and the blind pools of ancient days return and multiply by endless crossing and pyramiding as the investment trusts of today. Banks merge and emerge in chains, trailing trusts and holding companies, while industrial corporations pay dividends not by producing goods but by buying each others' stocks and by borrowing and lending everybody's money in the market. But of all these things can anyone say with surety what they signify, whether they are safe and sound, or what they are leading to? We do not even know, or cannot agree, whether inflation exists, what it means, or how it shall be measured.

"In face of the ignorance, uncertainty, and irrationality that surround every aspect of the "new era," it were wisdom for business to keep its feet firmly on the ground and assume for the present that the principles that prevailed through the long business past still govern the stability and success of business today."

September 7, 1929 (Business Week)

Northern Trust says it all in one chart. Each post-bubble reflation produces weaker results for the real economy than the last.

09-17-06, 05:11 PM
Northern Trust says it all in one chart. Each post-bubble reflation produces weaker results for the real economy than the last.

i've seen this chart and similar ones showing other specific recoveries as well. i'm wondering about how or whether demographic shifts might explain some of changes over time. we know, for example, that standards of living have been maintained by the shift in the second half of the 20th century from single income to dual income families as women entered the workforce in larger numbers. but they could, as a population, only enter the workforce once. thus recoveries in the late 50's, 60's etc would include rising employment from an increasing segment of the female population getting work. similarly there are age effects as the boomers arrive at retirement, more or less, earlier or later.

it might be interested to see a chart like this, employment over the course of a recovery, for white males ages 30-49, black females 25-40 or some other demographic slices. anyone seen anything like that?

09-18-06, 04:44 PM
Appears logical to me.

I would expect that new jobs are created only in work that is less easily 'outsourced'.
- Building houses and other infrastructure (hard to transport). But I we agree this sector will decrease the next years
- Health care (for elective procedures I would expect an increased transport of patients to be treated elsewhere, but this is not feasible for emergencies)

Hospital admin might be done in India and reading the X-rays too, but most hostital procedures need hands able to interact with the patients. And with an aging population this will be a growing market ... providing there is still money.