Conservative media are downplaying the severity of public sector job cuts by trumpeting data showing that the unemployment rate among government workers in May was 4.2 percent. But that statistic doesn't change the fact that public sector job cuts in this recovery have been more severe compared with previous recoveries and experts contend these cuts not only threaten the recovering economy but also impact private sector job growth.
Conservatives Cited Government Worker Unemployment Rate To Downplay Public Sector Crisis
Fox's Special Report Compared Government Worker Unemployment With Other Industries. From Special Report:
[Fox News, Special Report with Bret Baier, 6/11/12]
Fox's The Five Compared Government Worker Unemployment With National Rate. From The Five:
[Fox News, The Five, 6/11/12]
Fox's Brit Hume: “Unemployment Rate Among Government Workers In May Was ... The Lowest Of Any Sector.” Fox News senior political analyst Brit Hume said of President Obama:
HUME: On Friday, [President Obama] fretted that the economy was suffering because too many public employees face layoffs. In fact, as you just heard, the unemployment rate among government workers in May was 4.2 percent, roughly half the national average, and the lowest of any sector. [Fox News, Special Report with Bret Baier, 6/11/12]
Wash. Post's Thiessen: “It's The Public Sector That's Doing Fine.” Conservative columnist and former Bush speechwriter Marc Thiessen wrote in his Washington Post column:
Obama and Reid have it precisely backward: It's the public sector that's doing fine. According to the Bureau of Labor Statistics, the unemployment rate for government workers last month was just 4.2 percent (up slightly from 3.9 percent a year ago). Compare that to private-sector industries such as construction (14.2 percent unemployment), leisure and hospitality services (9.7 percent), agriculture (9.5 percent), professional and business services (8.5 percent) and wholesale and retail trade (8.1 percent). As Andrew Biggs of the American Enterprise Institute points out, the public-sector unemployment rate “is the lowest of any industry or class of worker, even including the growing energy industry.” If the rest of Americans enjoyed the same unemployment rate as government workers, Obama would be cruising to reelection. [The Washington Post, 6/11/12]
But Public Sector Job Losses Have Been Severe And Unusual
Public Sector Has Lost Over 550,000 Jobs Since Mid-2009. Business Insider posted a chart compiled from Federal Reserve Economic Data (FRED) showing that while private sector jobs (blue) have been increasing since the beginning of 2010, public sector jobs (red) - most of which are at the local level but also include federal and state jobs - continue to fall. The spike in the red line reflects the temporary hiring of Census workers in 2010.
[Business Insider, 6/8/12]
Wash. Post: State And Local Governments Continuing To Lose Jobs. The Washington Post created the following charts with data from the Bureau of Labor Statistics which show how monthly private-sector job gains compare to monthly job losses in state and local government:
[The Washington Post, 4/29/12]
Calculated Risk: Public-Sector Job Loss Is A “Significant Drag On Overall Employment.” Financial blog Calculated Risk highlighted how public-sector jobs during Obama's presidency (blue) compare to Bush's first term (red). Calculated Risk called these job losses “a significant drag on overall employment”:
[Calculated Risk, 3/18/12]
EPI: Loss Of Government Jobs In Current Recovery Contrasts Sharply With Other Recent Recoveries. The Economic Policy Institute stated that if public sector employment had increased the way it did in previous recoveries, “there would be 1.2 million more public-sector jobs in the U.S. economy today” and “these extra public-sector jobs would have helped preserve about 500,000 private-sector jobs”:
The figure below compares trends in public-sector employment in the last four recoveries. The current recovery is the only one that has seen public-sector losses over its first 31 months.
If public-sector employment had grown since June 2009 by the average amount it grew in the three previous recoveries (2.8 percent) instead of shrinking by 2.5 percent, there would be 1.2 million more public-sector jobs in the U.S. economy today. In addition, these extra public-sector jobs would have helped preserve about 500,000 private-sector jobs.
There is reason to be optimistic, though, as public-sector losses have moderated recently. If the sector begins to actually add jobs in the coming months, the economy would benefit significantly in 2012 and beyond.
[Economic Policy Institute, 4/5/12]
The Economist: “Government Payrolls Typically Swell In Economic Recoveries” But “Not This Time.” A May 12 article in The Economist noted that, although public-sector jobs usually increase following economic downturns, “for much of the past two years the biggest source of job losses has been the public sector.” From The Economist:
On May 8th Mr Obama sent Congress a “to-do list”, asking it for tax incentives and mortgage refinancing in the hope of boosting private job creation. Yet for much of the past two years the biggest source of job losses has been the public sector.
Government payrolls typically swell in economic recoveries, by 5.9% on average during the first 34 months after a recession has ended, according to data from the Bureau of Labour Statistics. Not this time, however: from June of 2009 government employment dropped by 2.7% (see chart). The 2.5m overall rise in employment since the downturn's end corresponds to 3.1m new private jobs, less 600,000 lost government ones. [The Economist, 5/12/12]
Krugman: During Reagan-Era Recovery, “Government Employment Had Risen By 3.1 Percent; This Time Around, It's Down By 2.7 Percent.” From economist Paul Krugman's March 4 New York Times column:
By this stage in the Reagan recovery, government employment had risen by 3.1 percent; this time around, it's down by 2.7 percent.
If government employment under Mr. Obama had grown at Reagan-era rates, 1.3 million more Americans would be working as schoolteachers, firefighters, police officers, etc., than are currently employed in such jobs.
And once you take the effects of public spending on private employment into account, a rough estimate is that the unemployment rate would be 1.5 percentage points lower than it is, or below 7 percent - significantly better than the Reagan economy at this stage.
One implication of this comparison is that conservatives who love to compare Reagan's record with Mr. Obama's should think twice. Aside from the fact that recoveries from financial crises are almost always slower than ordinary recoveries, in reality Reagan was much more Keynesian than Mr. Obama, faced with an obstructionist G.O.P., has ever managed to be. [The New York Times, 3/4/12]
Experts Note That Public Sector Job Losses Damage The Overall Economy
Wall Street Journal: Unemployment Rate Would Be Near 7.1 Percent Without Government Job Cuts. Wall Street Journal reporter Justin Lahart stated that, all things equal, “if there were as many people working in government as there were in December 2008, the unemployment rate in April would have been 7.1%, not 8.1%.” The post included the following chart:
[The Wall Street Journal, Real Time Economics, 5/8/12]
Economist Mark Zandi: “Job Losses At State And Local Governments Is The Most Serious Weight On The Job Market.” From an April 29 Washington Post article:
The state and local job losses are significant for several reasons, economists say. For one, these losses have a broad social impact. Laying off teachers means larger class sizes and fewer after-school programs, for example.
What's more, federal aid can go directly to state and local governments to prevent job losses, a relatively effective way to sustain economic growth. (Tax cuts, by contrast, can lead indirectly to job growth if they increase the amount of money consumers spend.)
“The job losses at state and local governments is the most serious weight on the job market,” said Mark Zandi, chief economist at Moody's Analytics, who has advised both parties.
Experts worry that the cuts will have lasting effects.
“There's a big body of research showing that a lot of the things that state and local governments spend their money on have long-term effects on the economy and society as a whole,” said Nicholas Johnson, vice president for state fiscal policy at CBPP. “Cutting school funding now can hurt the education of a future workforce.” [The Washington Post, 4/29/12]
Economist Scott Brown: Economy Would Be Growing A Full Percentage Point Faster Without Drag From Government Job Losses. From a June 6 ABC News report:
“The government is actually contributing to the slow recovery,” said Scott Brown, the chief economist at the Florida-based financial firm Raymond James & Associates.
Brown said that if it were not for the “drag” of this public sector job loss, the economy would likely be growing a full percentage point faster, with GDP growing at 3 percent rather than at 2 percent.
“That would help mop up the jobs lost during the downturn,” he said. “Factor in the drag from government and we are growing at a pace that's roughly enough to absorb the growth in population but not fast enough to make up much of the ground lost.” [ABC News, 6/6/12]
Economist Joel Naroff: When The Public Sector Cuts Jobs, “The Private Sector Gets Affected.” A September 2, 2011, U.S. News & World Report article quoted economist Joel Naroff who pointed out that “the private sector gets affected” by public-sector job losses. From U.S. News & World Report:
Those job losses are taking their toll on the national economic scene, and are in their own way creating more job losses in the private sector. “If we're losing [20,000 to 25,000] in the public sector, that's income and spending that doesn't occur. It's more like [35,000 to 40,000] jobs as a result of that,” says Joel Naroff, president of Naroff Economic Advisors, an economic consulting firm based in Holland, Pennsylvania. “So one job isn't just one job; it's more than one job. And so the private sector gets affected,” he says.
Behind those government job losses are budget cuts, particularly from states and local governments, many of which have lost revenues as lower incomes and lower property values lead to lower tax income. Those budget cuts mean fewer government contracts, which also leads to pain in the private sector. The winding down of the stimulus package also contributed to these losses, as federal assistance to state governments for things like extra Medicaid funding has disappeared, leaving many states with substantial budget gaps.
Altogether, the strain on the national economy is considerable. “There's no such thing as a free budget cut.” Says Naroff. “If the public sector trims [20,000 to 25,000] jobs a month, then the private sector has to create those jobs before the economy can add one job. That's the hole that the public sector puts the economy in at this particular point,” he says. [U.S. News & World Report, 9/2/11]
CBPP: Government Job Losses Hurt Those Who Don't Work In Government. From a February 8 report by the Center on Budget and Policy Priorities:
Here's how the economic damage from spending cuts happens: when lawmakers cut services they end contracts with private sector businesses and reduce spending on private sector goods, leading to layoffs or lower wages among private sector workers. When lawmakers cut services they also lay off teachers, firefighters, police officers, and other public sector workers (over 650,000 state and local government workers have lost their jobs since the recession hit the states). In turn, private AND public sector workers who are laid off, or who see their pay reduced, buy less and further reduce economic activity.
Deep cuts to state services also erode the foundations of a strong economy, in both the short and long term. Spending on education, transportation, and public safety has been shown to stimulate economic growth in the short run and is among the most important determinants of economic growth and job quality in the long run. Research also shows that expanding and improving upon these investments through well-targeted tax increases (in other words, finding new money to pay for better services) stimulates income and job growth. [Center on Budget and Policy Priorities, 2/8/12]
Brookings Institution: Government Job Growth Is Associated With Economic Recovery In Many Metro Areas. In June 2011, Howard Wial of the Brookings Institution observed that “government job growth is associated with the economic recovery of America's metropolitan areas” since 14 out of the 20 large metro areas with the strongest recoveries from the recession “gained government jobs since total employment began to recover in each metro area.” By contrast 12 of the 15 major metro areas with the slowest recoveries “lost government jobs since total employment began to recover.” Wial also noted that increased government employment boosts private-sector jobs and income:
I haven't been able to find anything else besides the growth of employment that's as closely associated with the strength of metropolitan economic recovery. Increased government employment means increased government spending, which means increased demand for goods and services and the creation of more private sector jobs and more private sector income. [The Brookings Institution, 6/22/11]
Wash Post.'s Klein: Public-Sector Job Losses Are A Problem That The Federal Government Could Actually Fix. In a June 8 post on The Washington Post's Wonkblog, Ezra Klein wrote:
Speaking of private-sector jobs, at this point the Obama presidency is net positive on private-sector jobs. Since February of 2009 - remember, Obama wasn't president for most of January - the economy has added, on net, 780,000 private-sector jobs. Hence the president's comments: The private sector's job creation machine is basically working, even if it would be nice to see it working faster. The public sector, conversely, has been losing jobs.
As a disclaimer, these numbers don't tell you very much. The bulk of the job losses came in early 2009, when Obama had just entered office and when his policies hadn't yet taken effect. Blaming him for what happened to the labor market in, say, March of 2009 is like blaming a firefighter for the damage the fire causes as his truck is pulling up. And even at this point in his presidency, the economy is driven by much more than his policy preferences. Europe, for instance.
That said, the place where you can most fairly blame the government for the shape of the labor market is in public-sector jobs. The federal government can choose to hire, fire or hold employment steady. It can give states money to keep emmployees on the job, or it can withhold that money. So the fact that the public sector is losing jobs isn't just a problem, but a problem that the federal government could, with 100 percent certainty, fix. [The Washington Post, Wonkblog, 6/8/12]