Consumers Trading Down

On July 11th the Wall Street Journal published an article entitled “U.S. Consumers Trade Down as Economic Angst Grows.” The article described Americans saving money by choosing less expensive brands and models of products. Wholesalers and retailers are cutting back offerings of designer brands for the less expensive “plain Jane” products.

The article concentrated on products but had almost nothing to say about services. If Americans just cut back on designer brands job losses should be moderate. If America cuts back on services, unemployment will spike upwards. That is because even though establishment employment went down by 438 thousand jobs from December 2007, there is a net increase in service jobs.

Construction and manufacturing were the big losers: off more than 500 thousand jobs since December 2007. Retail trade and temporary help services were the big losers in services, which were down more the 300 thousand jobs. Telecommunications, finance, and real estate were down as well. Declining industries lost 990.5 thousand jobs so that a net decrease of 438 thousand jobs includes an increase of 552.5 thousand other jobs, all of them service jobs.

For example, new government service jobs replaced 81.5 thousand of the 990.5 thousand jobs not including 44.5 thousand new jobs in public education and 68.5 thousand new jobs in private educational services. Government taxing, borrowing and spending is helping moderate job losses.

Despite the general decline of employment, jobs in leisure and hospitality went up 88.8 thousand from December 2007 to June 2008. Restaurants are the biggest employer in leisure and hospitality with 9.8 million jobs and nearly 78 thousand new jobs since December 2007.

Cooking can be a do it yourself service, even though we go out more and more with restaurant jobs up 740 thousand since 2005. Eating out and paying others to cook helps moderate job losses.

Other jobs in leisure pursuits are trending up faster than the national average and replacing manufacturing jobs. Combine spectator sports, amusement parks, golf and country clubs, fitness centers and gambling where jobs are up to 1.85 million nationwide.

The economic angst mentioned in the Wall Street Journal has not spread to health care services, which continue to increase, up 194 thousand jobs since December 2007. Health care and social service jobs have increased every year since 1990.

Maybe the Wall Street Journal is right and more people are opting for less expensive brands, but it is trivial matter compared to America’s growing reliance on services jobs. Government, restaurant, leisure and health care jobs go up in good times and bad. If any of them start to fall that is the time to worry.