Politics & Policy

Wal-Mart and The Everyday Job Creators

Take a look at our amazing, vital, private service-providing sector.

Wal-Mart is the latest corporation that liberal critics most love to hate. It’s also the nation’s largest private employer. In fact, the Arkansas-based firm’s ability to create jobs is so strong it is counter-cyclical, which is to say that the company adds jobs in recessions while U.S. employment is shrinking. According to an annual survey by Fortune 500, only about one-third of the component companies in the Dow Jones index created jobs in recent recessions. This select group, which includes Wal-Mart, has much to do with the resurgence in jobs. They deserve our respect, not scorn.

Wal-Mart and other service-sector companies are involved in the process of everyday job creation — a process that has accelerated since the 2003 tax cuts were passed. This fact rebuts one claim made by critics of President George W. Bush’s tax cuts, namely that U.S. payroll employment is expanding because the government has added more employees. Truth be told, private service-providing firms have added 4,130,000 million jobs since May 2002, the month private service-providing employment reached a trough after the 2001 recession. That’s close to the 4,142,000 million new jobs added by the entire U.S. economy in the same period. Goods-producing employment decreased by 340,000 and total government employment (federal, state, and local, including public education) increased by 352,000.

More government employees are not the reason the U.S. economy has been adding jobs. The reason, in good part, is the private service-providing sector, dominated by Wal-Mart.

Some tax-cut critics argue that government employment has stabilized overall U.S. employment in recessions since the Great Depression. Total government employment has expanded in eight of ten postwar recessions (the exceptions were 1981-82 and 1990-91). It also fell in the 1945 recession as demobilization occurred at the end of World War II. But contrary to what some critics say, federal government employment has actually declined on President Bush’s watch. (Note: It also fell while Bill Clinton was in the White House.)

But government employment during recessions is only part of the story. The more significant development is the evolution of the private labor market. Goods-producing firms are now a smaller percentage of total nonfarm employment than in the past. So service-providing firms like Wal-Mart employ a greater percentage of American workers.

Motor vehicle producer General Motors illustrates this transformation. For much of the postwar era, GM was America’s largest industrial corporation, leading the Fortune 500 employment survey for years. Yet GM employment has fallen in all recession years since the Fortune 500 survey was first published in 1955. Cyclical fluctuations in the economy’s goods-producing sector are greater than in the private service-providing sector.

The Fortune 500 survey also provides annual employment data for America’s largest corporations. According to the survey, only three Dow components recorded job gains in 1958, the first recession year after Fortune initiated its survey. In 2001, another recession year, the number of Dow components adding jobs leaped to 11. These included Wal-Mart, which joined the Dow in 1997, along with many other service providers: AIG, Citigroup, Home Depot, Johnson & Johnson, McDonald’s, Merck, and Microsoft.

Everyday job creation is a characteristic of this select group of Dow companies. The U.S. economy needs more firms just like these that create jobs for unemployed Americans in periods of recession.

–Greg Kaza is executive director of the Arkansas Policy Foundation, an economic research organization based in Little Rock.

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