John F. Hood
President, MCH, Inc.

MCH has been talking about the advantages of B2i, the recession resistant institutional sector of the economy, for years. According to recent newspaper headlines the institutional sector is getting hit as hard as businesses. But it is not. It’s the bad news that gets attention and readership and the headlines and news stories are biased accordingly.

Here are some recent examples:

• Cape May Herald.com (New Jersey) “February Unemployment Rate Jumps to 8.2 Percent”
• The Daily Astorian (Oregon) “Unemployment rises with economic tide”
• DAILY HERALD (Utah) “Utah’s job losses hit new high”
• The Detroit News (Michigan) “State jobless rate up to 12%”

Buried in each of the articles, typically near the end, are the following statements (in order):

• (NJ) The only area of significant job growth was in education and health services, which added 3,600 jobs in February. Employment in this industry sector has continued to add jobs (+13,600 over the year), running counter to recessionary declines recorded in every other industry sector.
• (OR) Across Clatsop, Columbia and Tillamook counties, healthcare is the one industry that has been growing over the past year. In February, Clatsop County lost 180 jobs in the private sector and governments added 40. Mining and logging employment fell by 60 jobs, construction cut 90 and manufacturing lost 40 and retail trade dropped 40 jobs. Local government education gained 70 jobs. … In Columbia County, the private sector lost 70 jobs and governments added 70. Manufacturing cut 60 jobs, trade cut 30 but educational and health services added 20. Local government education added 70 jobs.
• (UT) On a brighter note, the government and healthcare sectors in Utah are still hiring. The federal, state and local government sectors added 6,800 jobs in February from a year ago, while the health care industry added 3,000 jobs from a year ago, albeit at a slower rate.
• (MI) The education and health care sectors have been the only employment categories to show an increase since February 2008, posting a gain of 10,000 jobs.

Let’s examine another, more specific example:

The Kansas City Star “KCK school board cutting 36 central office slots”

Here is the text of the article in its entirety (bolded text is mine):

“The Kansas City, Kan., school board formally eliminated 36 central office positions Tuesday night, preparing for big budget cuts next year.

With vacant positions, the cut means 26 employees will lose their jobs and two others will be asked to work fewer hours for less pay.

A second wave of staff reductions starts Friday when preliminary pink slips are issued to about 50 employees, including teachers, aides, building-level administrators and more.

The pink slips will be preliminary because board members won’t give final approval to the second wave of cuts until at least April 14. Even then district officials said they expected to recall some of those teachers and employees depending on state funding, stimulus money and rate of attrition.

Board members had agreed to the plan to give employees as much notice as possible and comply with a state deadline that designates when districts must give teachers a contract.

State officials told the district to prepare to lose at least 6 percent of state funding next year – a loss of about $16 million.

Although the news is bleak, it’s not nearly as grim as board members had once expected. The board had feared it might have to eliminate up to 185 positions from a staff of 3,450.

Unlike teachers and those who learn their fate on Friday, district officials said it was unlikely the central office positions would be recalled. Those eliminated include custodians and employees from human resources, student and family services and elsewhere.

Assistant Superintendent J.D. Rios presented the report with a “heavy heart,” but said he saw few options if the district wanted to preserve instruction.

“Frankly the news from the state gets worse,” he said.

Affected employees will work through the school year.”
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Let me try and help you interpret this article. Can you tell me how many education jobs will be lost? I doubt it. First of all, none until after the school year several months away. So why the early notice? One reason is institutions like the Kansas City Kansas School District can’t spend money they don’t have. If they are told they won’t have enough, they inform their employees quickly (as a matter of law). But then if the money is restored, so are the jobs. So this article is written as if the stimulus funding doesn’t exist when everyone knows it does, and the money is provided specifically to prevent job losses in education. Of course, restored jobs don’t make headlines. If you can tell what’s really happening from this article, please let me know where the Dow Jones Industrial Average will be in a few months. We’ll both make a killing.

A similar thing happened in California in 2003. Tens of thousands of teachers got layoff notices under state law. In the end relatively few lost their jobs. The layoff notices got the press but the reality ended up differently.

The bottom line? Education, healthcare, and government (B2i in shorthand) are expanding while business is contracting. As a share of the economy B2i is growing while the rest of B2B is shrinking. The stimulus spending just getting underway will accelerate the growth of B2i. If you are looking for opportunity in this time of gloom, B2i is it. And if you are going to read those newspaper articles, read until the end and be a little skeptical.

CNN used data from RealtyTrac, The National Bureau of Economic Research, and the US Bureau of Labor Statistics to create an interactive map showing unemployment, employment, and foreclosure trends. Users can capture statistical information for a specific month or view the changes in each category from the time the recession began in December of 2007 through December 2009. MCH has been tracking the impact of the economic crisis for many months and we have consistently reported that safe havens are the education, government, and healthcare sectors. Although every industry has suffered, the job situation in the safe haven industries is on the positive side of the scale.

President Obama will address a joint session of Congress tonight and is expected to provide a high-level overview of the administration’s recovery plan.

USA Today featured a job growth forecast, prepared by Moody’s Economy.com. The report is segmented by geographic region and 14 key industries. Although the forecast for job growth, like the economy, is for the situation to get worse before it gets better, Education, Health Services, and Government are segments that are projected to either remain stable or grow in 2009. Manufacturing, Retail Trade, and Construction are industry segments that may not experience growth until at least 2010.

Moody’s will be adding interactive graphics on 318 metro areas in the coming weeks.