The aging of America may be good for the U.S. labor market.
A growing number of older people and rising health-care spending are driving demand for workers from nursing aides to surgeons. While the economy lost 7.5 million positions during the recession, health care expanded staff. Together with social assistance, it will add more than 5.6 million employees to become the largest job gainer by 2020, according to new projections released today by the Bureau of Labor Statistics. Manufacturing is forecast to lose 73,000 jobs by then.
Health care -- including doctors, nurses and hospitals -- was the largest contributor to employment growth in the past two years, with a 22 percent share that was almost twice as big as manufacturing. The U.S. workforce could use the boost: Monthly payroll gains are running below what’s required to reduce significantly the 8.5 percent jobless rate. Unemployment was 5 percent in December 2007, when the recession began.
“The first baby boomer just turned 65 last year, so when it comes to health-care jobs in America, we haven’t seen nothing yet,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. These jobs “are going to literally explode over the next two decades.”
Almost 87 million, or one in four, Americans will be 65 or older by 2050, according to the Organization for Economic Cooperation and Development.
Lack of Clarity
“The demographic story for health care remains good and will get better,” said Jim Paulsen, who helps oversee about $333 billion as chief investment strategist at Minneapolis-based Wells Capital Management. It still will be hard for investors to pick stocks in the industry, as prospects for hiring and profitability are clouded by lack of clarity on legislation.
The U.S. Supreme Court will hear arguments in late March on President Barack Obama’s health-care law, including the requirement that Americans either buy insurance or pay a penalty. Republicans competing for the White House have all said they’ll get rid of the law if they’re elected in November. Regardless of who wins, future presidents may try to turn the clock back on changes made by the previous one, Paulsen said.
“There’s going to be a chronic state of uncertainty in the health-care arena,” making it “really hard to place specific bets,” Paulsen said. “There will be opportunities on a value basis, rather than buy-and-hold.”
Aetna Inc. (AET), the third-largest U.S. health insurer, and Humana Inc. (HUM), the second-largest Medicare provider, may offer some of the best rewards for investors, according to Matt Borsch, a health-care analyst at Goldman Sachs & Co. in New York, who has “buy/attractive” ratings on both.
Competition among health-care providers will limit costs for managed-care companies, many of which also have a low price- to-earnings ratio, he wrote in a Jan. 4 note.
The Labor Department’s 10-year projections through 2020 showed total employment will grow by 14 percent during the decade, resulting in 20.5 million new jobs.
On Friday, the department will report that payrolls, which averaged a monthly gain of 137,000 last year, rose by 145,000 in January after climbing 200,000 in December, according to the median forecast of 81 economists surveyed by Bloomberg. The unemployment rate probably held at 8.5 percent, as factories added 13,000 jobs.
‘Improving Very Slowly’
“The labor market is improving very slowly, but at least we’re headed in the right direction,” said David Autor, an economist at the Massachusetts Institute of Technology in Cambridge, Massachusetts. Employment in health care “is definitely going to continue” rising, and manufacturing jobs “will see a recovery” as demand picks up.
While factories still represent a larger share of the economy -- 12 percent of gross domestic product compared with 7.6 percent for health care -- they have fallen behind since 2008 as a percentage of total payrolls, according to data compiled by Bloomberg News. Health services accounted 11 percent of jobs in 2011, outpacing manufacturing’s 9 percent.
The shift reflects productivity gains as factories produced more goods by replacing workers with technology and by shipping jobs overseas to cut costs. Health services require more face- to-face interaction, which means “these jobs are protected from the forces of globalization,” Rupkey said. “We can’t imagine a time when we’ll be able to outsource the job of a home health aide giving a senior a bath or helping with physical therapy.”
‘All That’s Left’
Openings in health care are more broadly distributed geographically, even in economically distressed small towns where they often are “all that’s left,” said David Card, an economics professor at the University of California, Berkeley, and director of the Labor Studies Program at the National Bureau of Economic Research.
They also provide “pretty good” opportunities, particularly for women, he said. This was evident during the 18- month recession, when health care added almost half a million positions, while construction, which typically employs more men, shed 1.2 million workers.
More importantly, the industry’s projected expansion would generate more jobs young people can prepare for and absorb out- of-work Americans -- even those without education beyond high school -- once they adapt to the skills needed.
“One of the few bright spots in retraining has been health care,” Card said. “That’s a kind of reliable thing.”
$21,760 to $225,390
Opportunities range from home health aides, who made an average of $21,760 in 2010, to surgeons, whose annual wages averaged $225,390, BLS data show.
Sharon Rudolph, 64, says she’s studying to be a nurse alongside classmates who previously worked in real estate and banking, as well as one who owns a nail salon. The Fort Lauderdale, Florida, resident was a radiologic technologist for two decades before taking a break during the 1990s to raise her family. Now she’s in a 27-month training program at the city’s Nova Southeastern University.
“I felt I’d become more marketable once I get out,” said Rudolph, who ensured that her licenses, including in registered diagnostic medical and cardiac sonography, remained current. “I have to work twice as hard as some of the kids” to keep up with the coursework, and the increased use of technology has “been a challenge.”
Demand for Nurses
Registered nursing, which requires at least an associate’s degree, will have the largest growth of all occupations, according to the new BLS projections, adding 711,900 jobs between 2010 and 2020, to reach about 3.4 million. Home health aides, who don’t need a high-school diploma but should have on- the-job training, will surge by 706,300, or 69 percent, to 1.7 million. Hiring among physicians and surgeons will rise by 24 percent, or 168,300, to 859,300.
Ten of the 30 occupations with the fastest projected growth are in health-care fields, including physical-therapist assistants, audiologists, dental hygienists and Rudolph’s specialty of medical sonography.
While the additional jobs will lift employment, many pay low or very low wages, according to the BLS. That means these workers will have less ability than employees in higher-paid industries to boost consumer spending, the biggest part of the U.S. economy.
“It is fine to have low-skilled jobs as part of the mix or portfolio of employment opportunities,” said Michael Spence, winner of the Nobel Prize in economics in 2001, and a professor at New York University’s Stern School of Business. “It is better than no jobs. But the mix is important too.”
Rising Government Spending
The work opportunities also are propelled by rising government spending on programs such as Medicare and Medicaid at a time when there’s pressure to cut costs and rein in the deficit, Autor said.
Health-care expenditures grew at an annual rate of 4.5 percent through November 2011, up from 3.9 percent in 2010, according to the nonprofit Altarum Institute’s Center for Sustainable Health Spending, based in Ann Arbor, Michigan. They accounted for 18 percent of GDP in October, compared with 16 percent at the start of the recession.
A continued rise may be moderated in coming years by looming budget constraints, because “we have to be able to afford it,” said Charles Roehrig, the center’s director.
Over time, “to fully address unemployment and income- distribution issues,” the U.S. needs more effective investment in skills, education, infrastructure and technology, and must become more competitive in the so-called tradable side of the economy, which includes manufacturing, Spence said.
Even so, health-care jobs may provide greater stability than factory and building-related work, which tends to fluctuate more with economic conditions. The unemployment rate for health services was 6 percent in December, compared with 16 percent for construction, according to BLS data that isn’t seasonally adjusted.
The U.S. also lags behind many smaller economies in the number of health-care providers per person, with two doctors for every 1,000 people in 2009, compared with three for Ireland, four for Spain and Portugal, and six for Greece, according to the most-recent OECD data.
Roehrig said that every 10 jobs in health care ultimately generate an additional 12 elsewhere in the U.S. economy, so without the industry’s hiring growth, the unemployment rate would have been 9.5 percent in December, instead of 8.5 percent.
For now, having more jobs “outweighs any other concern,” he said.