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Timothy Dunne |

Vice President

Timothy Dunne

Timothy Dunne is a former vice president and economist of the Federal Reserve Bank of Cleveland.

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Meet the Author

Kyle Fee |

Economic Analyst

Kyle Fee

Kyle Fee is an economic analyst in the Research Department of the Federal Reserve Bank of Cleveland. His research interests include economic development, regional economics and economic geography.

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01.10.13

Economic Trends

Employment in Education and Healthcare Services

Tim Dunne and Kyle Fee

Last month’s employment report showed continued modest expansion in payrolls for the month of December, with the economy adding 155,000 jobs. This is right on the monthly average for the entire year, which stands at 153,000 new jobs per month. About one-quarter of the jobs added in 2012 have been in the education and health services sector, and in December alone the sector accounted for 42 percent of the new jobs.

Over the course of the Great Recession and the subsequent recovery (2007:12-2012:12) the education and health services sector has expanded by almost 2 million jobs (10.7 percent), while the rest of economy has lost 5.9 million jobs and remains 5 percent below pre-recession employment levels. In fact, there was only one month in the entire period where education and health services actually showed negative employment growth.

The education and health services sector is composed of three distinct parts—private educational services (including private elementary, secondary, and higher education institutions; trade and technical schools; and other instructional services), healthcare (including doctor’s offices, hospitals, nursing home facilities, outpatient services, and diagnostic laboratories) and social assistance (including family services, emergency services, and day care services). Educational services make up 16.3 percent of the sector, healthcare accounts for 70.7 percent, and social assistance contains the remaining 13.0 percent of employment. It is important to emphasize that educational services represent private employers and do not reflect state and local government employees providing educational services.

Each industry within the broad sector grew over the last five years, with education expanding at the highest rate (12.2 percent) and social assistance growing at a somewhat slower rate (7.8 percent). Still, because of its overall size, healthcare industries have added the greatest amount of employment over the period, roughly 1.4 million jobs (a 10.8 percent rise). Within the healthcare industry, the largest gains have come in ambulatory care services. These services include doctor’s offices, outpatient services, and home healthcare services, and over the five-year period, ambulatory care industries employment expanded by 15.9 percent. This rate of growth was only slightly below the rate from the prior five-year period of 17.9 percent, so the recession did not slow the growth of ambulatory care services by very much.

Hospital employment expanded but by a much slower rate of 6.6 percent over the period. Part of the slower expansion likely reflects the fact that hospital groups have been substituting outpatient services for traditional inpatient services. These outpatient services are increasingly performed in nonhospital establishments—though clearly, hospitals can also perform a range of outpatient services. Employment in outpatient services (NAICS 6214) has grown by over 29 percent since the end of 2007, making it one of the fastest-growing subindustries within healthcare services. Home healthcare is another rapidly growing subindustry, increasing 30.8 percent over the past five years. In fact, home healthcare has grown 7.1 percentage points fasterfaster in the most recent five years than it had in the previous five years. Finally, nursing and residential care facilities expanded by 7.9 percent over the last 5 years.

Looking back over the longer term, there has been a steady rise in the employment share of education and health services industries. In 1970 these industries employed a little more than 6 percent of U.S. workers. Currently, these industries employ 15.3 percent of all workers, and as noted above, the majority of these are employed in healthcare industries.

This rise in the demand for healthcare workers is related to a number of factors including demographic trends. States with relatively old populations have a higher share of their employment in healthcare industries, and states that are growing older have tended to experience a rise in the share of workers employed in healthcare industries. It is very likely that the demand for healthcare workers will continue to increase as the baby boomer generation ages. Still other factors will affect the growth of healthcare employment, including healthcare finance, technology, and the supply of healthcare professionals.

The Bureau of Labor Statistics (BLS) projects that employment in healthcare and social assistance will continue to grow at a much faster pace than the rest of the economy, resulting in a net gain of 5.6 million jobs between 2010 and 2020. This is projected to account for almost 30 percent of nonfarm payroll employment growth over the decade.