Tenet Healthcare Corp (THC), Community Health Systems (CYH): What’s Behind the Sudden Health Care Job Growth Slowdown?

Congratulations are in order for 2,500 or so individuals in the U.S. These people claimed one of the net new jobs added in the health-care industry during July, according to data from the Bureau of Labor Statistics. While getting a job was good for them, the news isn’t so great overall. July’s figure represented the lowest monthly seasonally adjusted number of net new jobs added in health care in 10 years.

On one hand, a decade of continuous job gains is an impressive streak. On the other hand, the latest jobs numbers raises a question: What’s behind this health care job growth slowdown?

Digging into the numbers
The one area of health care that seems to be doing relatively well is ambulatory care services, which includes outpatient settings such as physician offices, outpatient clinics, and home health. Around 6,600 net ambulatory care jobs were added in July. Even that positive gain is a bit deceiving, though. That’s the lowest job growth reported by the Bureau of Labor Statistics in over two years.

Also, the biggest driver of new jobs in ambulatory care came from home health care services, which added 3,900 jobs in July. This ties in with the overall national trend of more new jobs coming from lower-pay and part-time employment. According to Moody’s Analytics, low-paying industries have accounted for 61% of U.S. job growth in 2013 even though these industries only comprise 39% of overall jobs. Around 77% of new jobs this year were part-time.

Looking beyond the “good” news, nursing care facilities cut 2,400 jobs during July. As a group, these facilities have only seen a net growth of jobs during one month so far this year.

Hospitals lost even more jobs. Around 4,400 workers were let go by the 5,700-plus hospitals across the country. July was only the third month in the past year and a half where hospitals recorded negative job growth.

What’s going on?
While some of the nation’s overall job weakness can be attributed to sluggish economies in other parts of the world, that reason doesn’t explain why health care job growth has slowed down. Some clues might be found by looking at publicly traded health care companies’ latest financial results.

Kindred Healthcare, Inc. (NYSE:KND) reported its second-quarter results this week. The company’s operations include 116 transitional care hospitals, six inpatient rehabilitation hospitals, 169 nursing centers, and 105 hospice, home health and non-medical home care locations. Kindred employs around 72,000 workers.

Richard Lechleiter, Kindred Healthcare, Inc. (NYSE:KND)’s CFO, blames sequestration in large part for his company’s woes. He noted that the 2% across-the-board cut to Medicare resulting from sequestration contributed to a $13 million decline in revenue last quarter.

Some hospitals, including Community Health Systems (NYSE:CYH) and Tenet Healthcare Corp (NYSE:THC), didn’t mention any negative effects of sequestration. Instead, their results focused on weak admissions volumes. It only makes sense that fewer patients require fewer caregivers and support staff. However, the nation’s largest hospital chain, HCA Holdings Inc (NYSE:HCA), reported modest increases in admissions.

Credit: Tenet Healthcare Corp (NYSE:THC)