November 2022 Health Sector Economic Indicators Briefs

Economic Indicators | November 18, 2022

Altarum’s monthly Health Sector Economic Indicators (HSEI) briefs analyze the most recent data available on health sector spending, prices, employment, and utilization. Support for this work is provided by a grant from the Robert Wood Johnson Foundation. Below are highlights from the November 2022 briefs.

Health spending growth continues to lag GDP growth

  • National health spending in September 2022 grew by 4.4%, year over year.
  • Health spending in September 2022 is estimated to account for 17.4% of GDP, essentially identical to the August 2022 value, which was the lowest share since June 2015.
  • Nominal GDP in September 2022 was 8.9% higher than in September 2021 as GDP growth continues to outpace health spending growth.
  • The health spending share of GDP has declined from a recent high of 18.5% of GDP in December 2021, largely because of high economy-wide inflation.

Health care price growth remains moderate amid slowing economywide inflation

  • The Health Care Price Index (HCPI) increased by 2.9% year over year in October, up slightly from 2.8% a month earlier. 
  • Economywide price growth slowed this month, as overall CPI inflation fell to 7.7% and PPI price growth fell to 8.0%. Services CPI growth (excluding health care) held steady at 7.0% year over year, while commodities inflation fell for a fourth straight month to 8.6%.
  • Among the major health care categories, price growth for dental care (5.4%), nursing home care (4.2%), and hospital services (3.5%) were above average, while physician services (0.3%) and prescription drug (2.2%) price growth were the slowest growing categories.
  • Growth in our implicit measure of utilization for September was the slowest it has been in 2022, down to 1.8% year-over-year growth from 2.2% a month prior in August.

Health care job growth remains strong while health care wage growth moderates

  • Health care job growth remained strong in October, with 52,600 jobs added. Health care has averaged 47,000 new jobs per month in 2022.
  • Most of the growth in health care jobs was in ambulatory care, which added 30,700 jobs in October. Hospitals added 10,800 jobs and nursing and residential care added 11,100 jobs.
  • The economy added 261,000 jobs in October, similar to August and September gains. The unemployment rate rose slightly to 3.7%.
  • Health care wage growth appears to be moderating. After peaking at 7.4% growth year over year in July, health care wages grew by 5.6% in September, nearer to economy-wide wage growth of 5.0%.
  • Wage growth fell across all three major health care settings: residential care wages grew at 7.7% compared to a peak of 11% in March 2022, hospital wages grew by 5.8% compared to a peak of 8.5% in June, and ambulatory care wages grew by 4.6% compared to a peak of 5.8% in July.

Inflation slowing as Wall Street looks bullish on healthcare sector

Wall Street’s roil has stabilized somewhat in recent days, with the S&P 500 brushing up against its 200-day moving average and rising more than 10 percent since its October lows, as of publication time.

The index’s 50-day moving average is trending up, according to financial data firm Refinitiv. But it still must climb another 7.4 percent to form a “golden cross,” which is when a stock or index’s short-term moving average rises above one of its longer-term moving averages. The S&P 500’s 20-day and 100-day moving averages are closer to the milestone, only needing increases of 5 percent and 1.2 percent, respectively.

The Dow Jones Industrial Average has already formed a small golden cross: its 20-day moving average is 1.2 percent higher than its 200-day moving average.

Investors Optimistic about Healthcare Sector

 Investors are most optimistic about the Healthcare sector, which is trading close to its 3-year average “price to earnings-per-share” ratio of 48.1x, according to Simply Wall Street.

 Analysts are expecting an annual earnings growth of 13.4 percent, higher than the sector’s past year earnings growth of 5 percent.

 Merck and Johnson & Johnson were among last week’s top gainers driving the market.

Inflation Appears to be Slowing

 The recent lower-than-expected inflation figures could indicate it is slowing.

 The Fed may continue raising rates, considering the strength in recent labor market and retail sales data.