Unemployment dips to 9 percent, but public-sector cuts drag down overall job growth

November 4, 2011

As politicians in Washington debate how to shrink the size of government, their counterparts in statehouses have actually been doing it. Public-sector jobs now account for the smallest share of the nation’s employment since the 2008 financial crisis, according to new data released Friday.

In October, the public sector cut 24,000 jobs while private industry continued adding jobs at a steady clip, the Labor Department said Friday. The nation’s unemployment rate fell slightly to 9 percent — but it would have been 8.7 percent had state and local governments not contracted the past two years.

Amid lower tax revenue due to the recession, state and local governments have cut 455,000 jobs since the beginning of 2010, almost half of them in education.

Overall, the proportion of government jobs fell to 16.7 percent in October, its lowest level in three years.

The cuts are a victory for those who argue for a leaner public sector, but they have also weighed down the overall job market.

“Things are moving in the right direction, but they’re not moving fast enough,” said Alan Krueger, who was confirmed late Thursday as chairman of the White House Council of Economic Advisers. “The gains in the private sector were fairly broad-based, which was good to see, but we keep seeing government employment contracting, especially at the state and local level.”

The report on the job market showed 80,000 net new jobs were created last month, with the strongest gains in the professional and business services sector, which added 32,000 positions — 15,000 of them at temporary help services. Other gainers included health care and education, which added 28,000 jobs, and leisure and hospitality, which added 22,000.

During the recession of 2008 and 2009, public employers generally held steady, not slashing jobs substantially. But since then, particularly since federal stimulus dollars ran out in 2010, the losses have been persistent.

The other major sector to lose jobs in October was construction, which shed 20,000 positions, and even that may have been due in part to government cutbacks.

“Some of the weakness in construction is due to state and local governments,” said Stuart Hoffman, chief economist at PNC Bank. “Highways, sewers, bridges, prisons, all the buildings state and local governments need, that’s been cut back as well.”

Overall, the latest job figures point to a labor market frozen in place, neither adding enough jobs to put the vast armies of unemployed — 13.9 million people — back to work, nor falling into an outright contraction or shedding jobs. Consistent with other recent economic data, the report at least offers relief from the fear of double-dip recession, pointing instead to slow-and-steady economic growth.

“The last few months give some confidence that the recovery hasn’t stopped,” said Tig Gilliam, chief executive of Adecco Group North America, a large employment services firm. “But companies are not sitting there saying, ‘I see such confidence in the recovery that I need to get ahead of it and hire now.’ They’re waiting until they absolutely have to bring on additional people.”

There were some positive signs. The Labor Department revised upward its earlier estimates of August and September job creation by a combined 102,000 jobs. And the ratio of people with jobs to the overall population ticked up one-tenth of a percentage point, to 58.4 percent. Average hourly earnings rose to $19.53 an hour from $19.50, and an additional 277,000 people reported themselves as having a job. Ninety-five thousand fewer people described themselves as jobless and looking for work.

And a broader measure of joblessness, which also includes those who have given up looking for work out of frustration and those who have part-time jobs but want to work full time, fell to 16.2 percent in October, from 16.5 percent.

But over the past three months, job creation has averaged 114,000 a month, close to the 125,000 positions needed each month to keep up with an ever-growing labor force.

Shortly after the jobs report was released, House Republicans seized on the opportunity to call on Senate Democrats to pass the stalled House jobs bill.

“Today’s report underscores the need for immediate action on the more than 15 bipartisan, common-sense House-passed jobs bills that are piled up at Senate Democrats’ door,” House Speaker John A. Boehner (R-Ohio) said in a statement. “Senate Democrats are out of excuses and the president must call on them to act.”

House Majority Leader Eric Cantor (R-Va.) urged Republicans and Democrats to “set aside our differences and focus on areas of common ground to create jobs.”

“We are a country that is built on the promise of opportunity and success for all,” Cantor said, “but right now the uncertainty created by Washington overreach and overregulation is costing jobs and crippling growth.”

Speaking at a news conference in Cannes, France, while attending the Group of 20 summit, President Obama said, “I’m worried about putting people back to work, because people are hurting and the U.S. economy is underperforming.” The nation must make sure that workers “get the skills and training they need to compete in a global economy,” he added, repeating his call for Republicans to support his $447 billion American Jobs Act.

“When they look at today’s jobs numbers,” Obama said, “that were positive but indicated once again that the economy is doing poorly, they need to think twice about saying ‘no’ again” to a jobs bill that economists say “is the only one out there that will make a dent” in the U.S. economy.

The Obama administration argued for a jobs plan that would funnel money to state governments to help them avoid more job cuts, but that idea faces strong resistance from members of Congress, including some Democrats, who see it as objectionable for the federal government to in effect bail out state and local governments.

Staff writer Ariana Eujung Cha contributed to this report.

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