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As Private Sector Bleeds Jobs, Government Gets a Pass (for now)

Leonard Gilroy
August 20, 2009, 12:44pm

Michael Cooper at the New York Times reports today that it's still boom time for government employment, even as the private sector bleeds jobs in the current recession:

While the private sector has shed 6.9 million jobs since the beginning of the recession, state and local governments have expanded their payrolls and added 110,000 jobs, according to a report issued Thursday by the Nelson A. Rockefeller Institute of Government.

The report, based on an analysis of federal jobs data, found that state and local governments steadily added jobs for eight months after the recession began in December 2007, with their employment peaking last August. State and local governments have since lost 55,000 jobs, but from the beginning of the recession through last month they gained a net of 110,000 jobs, the report found, in part because of the federal stimulus program.

Government jobs are always more stable than private sector jobs during downturns, but their ability to weather the current deep recession startled Donald J. Boyd, the senior fellow at the institute who wrote the report. "I am a little surprised at the fact that state and local government has remained as stable as it has in the nation as a whole, given the depth of the current recession," Mr. Boyd said in an interview.

The report offered several possible explanations for the disparity between the private and public sectors. It noted that there can be a short lag between an economic downturn and the time it hits states in the form of lower tax collections, and an even longer delay before the problems hit local governments in the form of reduced state aid and lower property tax collections.

It pointed to the slow pace of decision-making in many states, and the power yielded by politically influential unions. But it also noted that the demand for many government services rises in a recession, and said that billions of dollars of federal stimulus money sent to states helped them avert layoffs.

The full Rockefeller Institute report is here. The disparity between employment trends in each sector is stark, and taxpayers should be questioning their elected leaders on why it's fair for government employees get a pass in the recession while the private sector gets hammered. How on earth will we be able to right the economic ship if we're growing jobs in the sector of the economy that is utterly reliant on the productive activity of the sector that's bleeding (and in a number of states, raising taxes to boot)? The correct recipe for economic growth would be precisely the opposite—more private sector employment, smaller government, lower tax burden.

But no one should really be surprised here. This trend has been known for some time now, so consider today's news an update. And it seems pretty obvious that this won't last for much longer. Government employment will start taking a hit over the next six months as recently-enacted budget reductions (with program cuts, pay cuts, etc.) take effect (at least at the state and local level, where they actually have to balance their budgets). And because states and locals are facing at least another two years of fiscal pain, we can almost certainly expect that to continue for some time. So I'd say that this new report—while certainly troubling—is a snapshot in time, and the full employment story of the current recession will remain to be told.

What I find to be the more troubling aspect of this report is not what's happening now, but trends over time. The NYT article included the following chart showing employment trends over the last six recessions, making it very clear that national (even global) economic woe is no obstacle to government growth, generally speaking. This may be the first recession in the last 40 years in which we see state and local employment both dip below the x-axis into negative territory. Only in 1980 did we see a significant decline in local government employment; otherwise, state and local government employment rose significantly every single time. By contrast, private sector employment has taken a deep hit each time.

Something's seriously wrong with this picture. When are we going to realize that "it's the spending, stupid?" It seems to me that taxpayers tend to focus (rightfully) on their tax rates, but they're not preoccupied enough with what their taxes collected are being spent on. After all, taxes generally rise and fall over time, but government employment seems to just grow and grow. Until policymakers begin seriously focusing on the slow creep of government and cutting back the weeds, expect the employment imbalances to continue.

Until then, expect the public sector to be spared the same economic pain as the rest of us.


Leonard Gilroy is Director of Government Reform


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