Government jobs are (still) the problem

September 6, 2013

One of the reasons for quiet optimism about the economy over the last few months has been the possibility that state and local governments have finished their long retrenchment and that government hiring might soon contribute to job creation.

Never mind.

From July 2008 to January 2013, the sector shed more than 737,000 jobs. Had the jobs merely been maintained, the unemployment rate would be as much has half a percentage point lower. Indeed, the state and local pullback is one significant reason that this recovery has been weaker than those in the past. Here is a chart, prepared by the White House Council of Economic Advisers, that compares the progression of employment by this sector with past economic recoveries.

Source: White House
Source: White House

You can't cut forever. And earlier in the year it looked like the long, slow drag that state and local governments were exerting could be ending, and that the sector could even prove a source of strength for the moribund job market. The June jobs report initially indicated 13,000 local government jobs added. The July report counted 6,000.

It seems to have been illusory.

A big part of the reason why the August jobs report was disappointing is that the Labor Department revised down June and July job growth estimates by 74,000 jobs. And more than half of that, 38,000, was due to government job losses.

Add it all up, and the picture for government employment is murkier. The total number of state and local government jobs is now below 3,000 below its April level. The federal government looks even worse; with the sequester spending cuts and an ongoing contraction by the U.S. Postal Service, federal government employment fell by 36,000 jobs since April.

In other words, the onus for job creation is almost entirely on the private sector, which is being whipsawed by forces of its own. Neither Uncle Sam nor the state and local governments around the country are doing much to help the sluggish job market.

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Sarah Kliff | September 6, 2013