Health Care's Long Employment Boom May Soon Be Over

Economic troubles may finally be taking their toll on the reliably strong industry.

What will the hospital of the future look like?

What will the hospital of the future look like?

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Health Care for years looked like the unsinkable industry. Over the last 20 years, health care employment has stayed on a steady, strong upward trajectory. Now, that steady upward climb is showing signs of flattening out.

The recent July jobs data showed that health care only added 2,500 jobs, its lowest monthly total in 10 years. July 2003 was the previous low, and it was also the only negative month for the industry over the span of available data from the Labor Department, which stretches back to 1990.

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And it's not just that July was an outlier. In 2013, health care hiring has averaged 15,700 new jobs a month. That's well below the 26,700 average of 2012 and 19,800 in 2011. If 2013's average remained at 15,700, it would be the lowest average monthly growth in health care employment since 1999, when average monthly growth was 12,000.

That's a troubling trend for an industry that has been a reliable source of job growth for decades. Health care accounts for more than 10 percent of all U.S. jobs.

A long-suffering economy is likely one factor putting the brakes on health care employment, says one analyst.

"In the health industry, probably the most immediate reason for a slowing in the pace of growth is the cost squeeze that the industry is facing," says Patrick O'Keefe, director of economic research at accounting firm CohnReznick. "Household incomes are and have been flat for a long time, which impinges on spending, including health spending."

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In addition, he adds, high unemployment means less health care coverage through employers, which can mean people avoiding the doctor (and high medical bills).

It's not just a slow economy that might be contributing to the slowdown, he says. If the health care industry is getting more efficient – treating the same number of patients with fewer people – that could also account for a flattening growth curve.

Health care employees have seen slightly better pay increases than their compatriots in the broader private sector. Since July of 2006 (the earliest year for which the Labor Department has data), health care workers have seen their inflation-adjusted pay grow by nearly $1.40 per hour in 2013 dollars, to $26.66 as of July. Meanwhile, private-sector employees as a whole have only seen a 46-cent bump, to $23.98. The job growth has come from many parts of the health care industry, though hospitals saw a marked deceleration starting in late 2008.

Not that everyone foresees a stalled health care industry. After all, employment growth hasn't yet slipped into reverse.

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"I really think the prospects are pretty good," says Douglas Handler, chief U.S. economist at IHS Global Insight. "There are couple favorable things happening in the sector – one of course is our general forecast where we see stronger employment growth" across industries in late 2013 and early 2014, he says.

The main threat that the health care sector faces, he says, lies in the implementation of the Affordable Care Act, also known as "Obamacare."

"I think there's a lot of anxiety out there the act might be repealed," he says, which could be dragging on the health care industry's prospects. "It's certainly creating a lot of uncertainty, which impedes companies' planning and therefore the health care sector's planning as well."

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He believes that if firms can make sure they know how the new law will affect their business, it could serve to speed health care's growth.

"If we can get rid of all that uncertainty and really start focusing on the implementation of that, I think it could be positive for health care employment," Handler says.

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