80/20 Rule: Leading Indicators for Employment and Economic Recovery - Part 1

Interestingly, FOUR industries account for 45 million jobs (41% of total enterprise employment) in America; they also account for over 5 million unemployed workers or 42% of all unemployment!

They are Retail, Construction, Professional Services and Healthcare/Social Assistance.

This 80/20 Blog Part 1 of 4 focuses on Construction.  While this industry represents only 5% of total employment, in 2010 it had a 20% unemployment rate and represented over 10% of all unemployed workers with an estimated 1.4 million unemployed.

One key leading indicator is the number of permits issued for private housing per year. 

A dramatic drop in permits in 2008 and 2009 signaled a dramatic rise in the unemployment rate in this sector.  The good news is that 2012 stats are now showing a positive trend.  This will be a key indicator to watch during 2013.  If we see permits rise to the average level of the 1990's (approx 1.3 million per year), we could see the creation of 750,000 jobs, reducing the sector unemployment rate to below 10% and national unemployment rate down by over 0.5%.

Note: Statistics above based on 2010 and other US Census data

80/20 Rule - Why President Obama's Jobs Council Has the Wrong Membership

US Census data* shows that over 5 million firms (99% of all US Firms) had fewer than 500 employees and provided almost 50% of all US jobs.  

The majority of these firms actually employ fewer than 20 employees.  Yet when we look at the President's Jobs Council of 25 members, 14 come from big companies, 6 from private equity/pension funds, 2 from unions, 2 academics and only one from a small company. 

Statistically, at least half the future jobs will likely come from small companies.  If we are serious about putting America back to work and having an effective Council providing balanced advice to Washington and the President, then at least half the Council members should come from small businesses.

* 2010 Statistics of US Businesses - United States Census Bureau - US Department of Commerce