Study: Across-the-board defense cuts could cost 1 million jobs

Across-the-board budget cuts set to hit the Pentagon in January would destroy nearly 1 million jobs by 2014, with Virginia, California and Texas absorbing the biggest hits, according to an analysis released Thursday by the National Association of Manufacturers.

The job losses would probably include about 750,000 private-sector positions, including about 100,000 jobs in manufacturing, even as President Obama is promoting manufacturing as key to the nation’s economic recovery.

The report is the latest in a growing heap of studies warning of dire economic consequences if policymakers fail to avert about $100 billion in cuts to the Pentagon and non-defense programs next year. The cuts, known as a budget “sequester,” were adopted last summer as part of a deal to rein in the soaring national debt.

In recent weeks, separate analyses by George Mason University, the Bipartisan Policy Center and the aerospace industry have reached similar conclusions about the impact of the cuts on jobs and unemployment. More studies are undoubtedly on the way. On Thursday, the Senate approved a bipartisan plan to require the Obama administration to say how it would implement the cuts and to detail the impact on the Pentagon and other federal agencies. If the measure passes the House, a report on the defense reductions would be due in August.

The defense cuts are of particular concern to manufacturers — not just big defense contractors such as Boeing and Lockheed Martin but also hundreds of smaller firms in their supply chains. The NAM study, which was conducted by the Interindustry Forecasting Project at the University of Maryland, projects that the aerospace industry could lose 3.4 percent of its jobs by 2015 because of downsizing at the Pentagon. Shipbuilders could shed 3.3 percent of their workforce by 2014. And the search and navigation equipment industry could see employment drop by nearly 10 percent by 2016.

Taken together, the January cuts and defense cuts already required under budget caps approved last summer could cost the nation as many as 1.1 million jobs by the end of 2014, the peak year for job losses, according to study projections.

California, Virginia and Texas would suffer the most, with each state shedding more than 100,000 jobs. The study predicts that Florida, New York, Maryland, Georgia, Illinois, Pennsylvania and North Carolina would round out the top 10.

Increasingly panicky industry representatives are lobbying Congress to block the cuts, as well as a massive tax increase that is also set to hit in January as the George W. Bush-era tax cuts expire.

NAM representatives went to Capitol Hill on Thursday with a delegation that included Barry DuVal, the president of the Virginia Chamber of Commerce, who declared that one out of five jobs in Virginia is connected to defense. They also took Della Williams, the chief executive of Williams-Pyro Inc., a five-decade-old Fort Worth firm that makes an array of products for the military.

Williams said that she isn’t laying off people yet but that her 92 employees are growing increasingly nervous about working in an industry that they view as “a sinking ship.” Although the federal government needs to balance the budget, she said, “sequestration is surgery with a chain saw.”

Lori Montgomery covers U.S. economic policy and the federal budget, focusing on efforts to tame the national debt.
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