Our Sick Economy
In 2021, historian Gabriel Winant authored a remarkable book, The Next Shift: The Fall of Industry and the Rise of Health Care in Rust Belt America, that told the story of both 20th-century Pittsburgh and the transformation of the American workforce. Its focus was the decline of the steel industry, which had dominated the Pittsburgh economy, and the rise of the health care industry, which came to dominate that same economy as steelworkers either aged out of their jobs or saw those jobs eliminated, in both cases saddled with industry-related infirmities that required medical care. Its focus was also the challenge to the Pittsburgh economy as the number of steelworkers dwindled (their union had made them among the best-paid blue-collar workers in America), and the number of health care workers rose (whose wages weren’t comparable to the steelworkers’, though the subsequent unionization of a number of them only partly diminished that gap).
I was reminded of Winant’s book by last week’s reports from the Bureau of Labor Statistics, which documented the declining number of workers in virtually every sector of the economy over the past 13 months, save only health care. During 2025, the number of workers employed in the manufacturing, construction, and retail sectors dropped by 115,000. The health care industry, by contrast, added 437,000 net new workers, while the social assistance sector, which consists chiefly of home health care aides, grew by 321,000.
The overall private-sector economy grew by just 181,000 jobs last year, which means that it would have ended up with 577,000 fewer jobs on December 31 than it had on the previous January 1, had health care and social assistance not boosted it into positive numbers.
These trends have continued into this year. The BLS report for January of this year shows that nearly all the jobs created last month were in health care and social assistance. Jobs in construction also increased, but that was largely attributable to the boom in data centers. The number of jobs in residential construction continued to shrink.
Donald Trump deserves to take his lumps for part of the overall job destruction, most particularly by downsizing the number of federal government employees and impeding private-sector expansion by inflicting tariffs on imports that employers needed to manufacture their products or sell to consumers. But these larger trends predate Trump’s second term and signal more profound and long-lasting challenges for the American economy.
Even before AI became sufficiently advanced to (apparently) supplant thousands of workers in the tech industry, programmable machine tools had long been replacing workers on assembly lines. Fifteen years ago, the then-CEO of U.S. Steel told me that two workers were then turning out the same level of product that had required ten workers just one decade earlier. A rolling mill today has hardly any workers on the shop floor; rather, the remaining workers are in booths suspended on catwalks above the floor, regulating the flow of molten ingots by monitoring screens and turning dials and switches.
The offshoring of factories, call centers, and any facility where the work comes cheaper abroad has been common practice for financialized American corporations for the past 45 years. Even more fundamentally, those corporations have greatly reduced the share of their operating income going to their internal investment (new or improved facilities, research and development) while raising the share going to shareholders. In the decades preceding 2000, approximately 4.8 percent of U.S. corporations’ operating income went to share buybacks; that share rose to 21.2 percent in the decades following. Rewarding owners, in other words, took precedence over producing products and creating jobs. The meta goal of American capitalism, however unstated it may have been, was to create the K-shaped economy we have today.
But American consumers have one demand that can’t be denied: health care. And as the number of elderly Americans has grown, so has that demand. As is not the case for other sectors of the economy, demand for health care is neither countercyclical nor procyclical; it’s not cyclical at all. Despite the fact that ours is the only nation with an advanced economy in which health care is not universal, despite the fact that our distinct version of health care costs far more than that of any other nation, despite the cutbacks to health coverage that Trump demanded in order to cut taxes on the rich, the sector continues to grow. Were that to stop, the entire economy would stagnate (at best), or plunge into recession.
There’s no single panacea that can turn around the shrinking job numbers in the rest of the economy. Technology, of which AI is merely the tip of the spear, will continue to replace humans, and the fact that fewer than 6 percent of private-sector American workers are unionized means that 94 percent of them won’t even have a vehicle with which to resist such wholesale replacements. Some regulation of AI will be enacted (let’s hope) to protect its consumers; protecting human workers is clearly also needed, but likely more difficult to achieve. The kind of industrial policy that the Biden administration began is also necessary, though 21st-century factories will require a small fraction of the workers needed to turn out products that used to require hundreds or thousands.
Growing government investment in infrastructure and education remains the surest bet to boost underperforming sectors of the economy. When it comes to private-sector investment practices, jump-starting a return to internal investment on the part of American corporations will require nationwide laws and regulations effectively mandating de-financialization—banning share buybacks; raising taxes on investment income, top-executive pay, and excessive (i.e., socially dysfunctional and politically destabilizing) wealth to the levels required to de-financialize our economy.
No easy lifts there, though all polling shows that taxing the very rich is very popular. And as job creation outside health care continues to stagnate, raising government investment in ways that create jobs may well surmount the ideological hurdles it often confronts.
Either that, or our economy is bound for the ER.
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