The damp and dreary day on Wednesday was a good setting for the public release of a report that shows federal workers are increasingly dreary about their jobs.

Best Places to Work in the Federal Government,” produced by the Partnership for Public Service, shows declining job satisfaction, and that includes the pay blues. That’s not good news for Uncle Sam’s efforts to recruit and retain talent.

The federal pay freeze “keeps qualified candidates from looking at us,” Barbara Rose, a clinical program specialist with the Veterans Affairs Department, told my colleague Ed O’Keefe.

While pay is a key contributor to declining satisfaction, it is less important than workers’ misgivings about their agency’s leadership and the match of employee skills with their organization’s mission.

Although concerns about leadership and the skills match carry more weight than pay in determining overall job satisfaction, it is government pay, and more broadly compensation, that is in the spotlight.

That makes sense. Congress is not likely to change an agency’s leadership, unless the legislators overdose on micromanagement. But lawmakers can have a direct impact on pay, as they did when Congress approved President Obama’s plan for a federal two-year pay freeze that began in January.

Government-wide, employee satisfaction with pay dropped by 6.1 percent and the higher the pay level, the greater the fall. For those in the Senior Executive Service (SES) and other senior-level positions, the drop in pay satisfaction was 7.8 percent; General Schedule (GS) grades 13-15, 6.1 percent; GS grades 1-12, 4.7 percent and federal wage grade, 2.4 percent.

While the pay freeze may dampen satisfaction with employees’ current gigs, it also can discourage them from seeking higher ground.

“Many talented experienced GS-14s and 15s who might otherwise aspire to the SES don’t see any financial advantage to taking on more responsibility and less job security,” said Carol A. Bonosaro, president of the Senior Executives Association.

The compensation package remains a target, particularly for congressional Republicans. The House budget resolution included a five-year pay freeze and called for employees to contribute more to their pensions. The bipartisan National Commission on Fiscal Responsibility and Reform suggested basing retirement on the five highest years of earnings instead of the highest three, which likely would speed retirement plans for those of that age.

Other proposals call for reducing the workforce, freezing it or imposing mandatory furloughs. And there’s no doubt that future deficit-reduction efforts will hit the federal workforce.

Although the Heritage Foundation’s James Sherk argues that federal workers in general are overpaid compared with their private-sector counterparts, information based on newly released Bureau of Labor Statistics data indicate the gap between federal and private-sector pay is 26.3 percent, with federal workers on the short end.

With this environment, the Partnership said the job satisfaction decline is “not as big a drop as one might have expected given the difficult economic and political climate that has led to a federal pay freeze, the possibility of reduced worker benefits, threats of government shutdowns and the certainty of significant agency budget reductions.”

Nonetheless, Rep. Jim Moran (D-Va.) said, “Pay freezes and reductions in benefits will only exacerbate the coming brain drain” of baby boom retirements. “Competitive pay and benefits are major factors in attracting the best and brightest to public service.”

But if cuts are coming, what can agencies do to lessen the impact? “It’s a matter of choosing smartly,” said Max Stier, president and chief executive of the Partnership for Public Service. It is “not simply how to take money out of the [pay] system, but how to redesign the system so it is more market sensitive.”

Agencies can be creative about retention, even when they can’t pay their people more. Miriam Cohen, the Nuclear Regulatory Commission’s chief human capital officer, said her agency promotes training and internal job fairs to enhance careers. The agency also reminds workers that the federal benefits package is pretty good.

So far, there is no indication that declining job and pay satisfaction hurt productivity, probably because federal employees have a strong sense of mission. But can that last?

Job satisfaction is an important factor in employee morale, and “falling morale is without question a drain on productivity,” said Randy Erwin, legislative director for the National Federation of Federal Employees. “If the super­com­mittee cuts federal pensions or extends the pay freeze, expect employee morale and productivity to fall even further next year.”

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