Skip to main content

Healthcare Job Growth Stubbornly Weak

 |  By John Commins  
   May 09, 2011

Because the U.S. population is aging, gaining weight, and thus requiring more healthcare services, conventional wisdom has it that the demand for healthcare workers will remain strong. To an extent, that has been true.

In April, for example, for the second consecutive month, job growth in the healthcare sector showed impressive gains, Bureau of Labor Statistics preliminary data shows. Healthcare sector consistently has been one of the few job-creating sectors in the recovery. And, The Conference Board monthly review of online job postings consistently shows that there are three jobs available for every skilled healthcare provider.

What's puzzling, though, is another report from The Conference Board this month which shows that post-recession job growth in the healthcare sector today is the slowest it's been during an economic recovery since 1960.

Healthcare sector job growth was 6.9% in the months after the recession of 1991, and 4.5% following the 2001 recession, but only 3.5% in the 21 months since the recession ended in June, 2009, The Conference Board research shows.

What's going on?

"If you look at the 21 months since the recession, the recovery in healthcare jobs is the weakest among all recoveries in healthcare jobs," Gad Levanon, associate director of macroeconomic research at The Conference Board, tells HealthLeaders Media. "It's one of the fastest growing industries, but it is always one of the fastest growing industries. But in relative terms healthcare is recovering more slowly than in any other recovery."

"It's a mystery to me," Lavanon says. "You would think that as the U.S. population is getting older the demand for healthcare services is going to get stronger as well. What we see is that in this decade, the increase in the number of healthcare workers is much slower.

"In many cases, the explanation could be outsourcing or productivity growth, but I don't think that is a good explanation for healthcare, where things can't be outsourced and it is labor intensive," Lavanon says.

Is the healthcare sector --  which already employs more than 14 million people -- becoming more efficient and productive, and thus not in need of as many workers? Or, is job growth slowing because there aren't enough people to fill the positions? Or, is job growth slowing because the healthcare sector can't afford to add to the labor force, nor can consumers continue to support that added cost? I suspect that the answer involves all three questions.

Slow job growth does have its upsides. It would appear that this halving of the rate of job growth in the healthcare sector has slowed the growth of healthcare inflation, at least in the short-term. Labor costs constitute about 60% to 70% of the budgets at many healthcare organizations.

As I reported a couple of weeks ago, Standard & Poor's Healthcare Economic Indices shows that the average per capita cost of healthcare services covered by commercial insurance and Medicare grew 6.19% over the 12 months ending in February. (The Consumer Price Index showed that overall inflation grew by 2.1% for the same period.)

That's high -- unsustainable, actually -- but the rate of growth in healthcare inflation has been steadily decelerating since it hit a high water mark of 8.74% for the 12-month period ending May 2010. S&P analysts have noted that hospital employment growth has correspondingly slowed significantly, falling from 2%-3% increases between 2008 and early 2009, to 1% since the middle of 2009. S&P analysts believe that slowing rate of inflation in healthcare is also tied to high unemployment in the overall economy, but they also warn that the slowing trend could quickly reverse.

So what's next? If we accept that labor costs are the biggest driver in healthcare inflation, does that mean that healthcare employment growth will slow even more? Will healthcare workers be expected to do more, with less help? Can healthcare workers expect to see their salaries and other compensation stagnate, as it has in most other sectors of the economy?

Once again, I suspect the answer lies in the questions. We're already seeing compensation costs decline for healthcare workers, a trend that has been around for the last 20 years or so, and hospital layoffs have become a daily event. 

It's worth remember, however, that the healthcare sector grew 466,400 jobs in the 21 months since the recession ended, as the entire economy -- including healthcare -- grew 1.3 million jobs. Since June 2009, the financial, construction, and state and local government sectors lost 1.1 million jobs. 

So, healthcare sector job growth is at record low levels in a post-recession recovery, but it is still growth.

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

Tagged Under:


Get the latest on healthcare leadership in your inbox.