Thank Goodness for Government … Work

Over-the-year percent change in employment, United States and 12 largest metropolitan areas, October 2008 (BLS, click on chart for clearer view).

Tuesday’s GDP report shows that were it not for growth in the government sector, the economy would have shrunk by more than three times as much as it did–which was by 0.5% (annual rate) in the third quarter. For those who know and love national income and product accounting (NIPA) or just feel like waxing nostalgic about your college intro econ class, here’s how the -0.5% decline in real GDP breaks down in terms of percentage point contributions (from Table 2 in the report), a la the famous C+I+G+(X-M):

C (personal Consumption expenditures): -2.75

I (gross private domestic Investment): +0.06

G (Government consumption expenditures and gross investment): +1.14

(X-M) (net exports, or eXports minus iMports): +1.05

…which means that thus far in this recession, growth in government and net exports is offsetting most of the decline in consumption.

Which reminds me how fortunate I am to live and work in the DC metro area, an area pretty much centered around federal government-related work. Because “we don’t bend metal around here” (as a friend of mine puts it), we’re doing much better around here than in most other parts of the country. Tuesdasy’s Washington Post story by Annys Shin complains of the unusually “widespread pain” of this recession, explained by the geographic breadth of the industries most adversely affected in this downturn–some of which admittedly may never “turn back up”…

Recessions can be notoriously uneven. They can wreak havoc with the livelihood of factory workers but not that of bank tellers or nurses. Whole industries can see jobs washed away forever, while others hum along and even grow.

This time, however, the pain is more widespread, economists say…

Another key difference with past recessions has been the downturn’s “serial nature”…

In other words, the recession has not affected industries and regions at once, but has rolled out in spurts.

Industries with some of the steepest job losses include construction, financial services, retail and manufacturing. The regional differences in job losses reflect how large a role those industries play in a given area’s economy.

In her story, Annys brings up California, Michigan, and Texas–but she doesn’t mention the DC area. Although the metro area economy isn’t exactly “booming” now, I know we’re still going to weather this recession a lot better than the rest of the country. Just a quick look at the Bureau of Labor Statistics’ “Economy at a Glance“ data shows why this area is so much better off than, say, Michigan: manufacturing jobs represent just 1.7% of total (nonfarm) employment here, but 13.7% of total employment in Michigan. Government jobs (572,000 of them, at all levels) represent 21% of total jobs in the DC metro area. And even though manufacturing jobs here have been declining recently, they’ve declined by a much smaller percentage than in Michigan or the rest of the country, because chances are pretty good that most of the metal we do bend around here, is bent for the government.

Here’s the latest (October 2008) metropolitan area comparison of employment trends from the BLS, from which the figure above comes, which shows Detroit dead worst, and only the oil-producing areas of the country doing better than the DC area–as of the fall at least, when those Texas communities were still benefitting from high oil prices… That’ll change, as the only part of our economy we can count on to grow over the next year is the federal government, or whatever the federal government will end up subsidizing.

Comments

[baldguy:]

Informative article-looks like that without our gov deficit spending we were down over 2 1/2 % Ouch!

2008 Dec 23 04:26 PM

[Robert Nabloid:]

Good article.

I wonder how many of the people laid off can (or are able to) get jobs in government? Not a good trend.

2008 Dec 23 06:42 PM

[Steven Hansen:]

this is exactly what happened during the great depression. certain areas unemployment approached 100%, other areas were unaffected. we have a demographic shift this recession also. i would expect florida, arizona and new mexico to have offsetting flows, and be relatively uneffected.

merry christmas to you diane.

2008 Dec 23 07:57 PM

[Tony Petroski:]

It's true that living in Washington D.C. must seem flush right now since so many government jobs are going to be "created" (at the expense of destroying many real jobs elsewhere). On the other hand, two of the planes on 9/11 were heading towards D.C. (one getting through). I pray there will be something left of D.C. after the next attack.

2008 Dec 23 08:36 PM

[John Lounsbury:]

I hope I don't offend anyone with some macabre sarcasm: We have been complaining about the exporting of American jobs. What will we export when all the jobs have disappeared? The government?

Diane Lim, I have enjoyed your articles. Have a Merry Christmas and a Happy New Year.

2008 Dec 23 10:23 PM

[Moon Kil Woong:]

Unfortunately, as any economist will tell you the government tends not to be an efficient participant in the real economy (they produce less goods and services put into them). Of course, they are not suppose to be since they are suppose to be responsive to the public's desires more than anything else (I know you wouldn't believe that after 8 years of Bush Jr. but they are). Even worse the government is terrible at reallocating resources. This is because there is no market messages to indicate to them how much is enough or too much allocation. The old Soviet Union is a good example of that.

If the US funds GM who's to say how much cars should be produced if we pay them to make cars no matter what. Or employ people no matter what. And if it is done without regards to economics, who'sto say how much they should invest in equipment. And if they are funded even if there is no demand why not just raise the CEO's pay once again for his great bargaining power with the government's office of pork?

In the end no economy really grown until real goods and services increase. You can load up the wheelbarrows full of money all you want but that's just a paper game. Everyone should focus on how to deliver goods and services the public really needs and how to give people a sense of stability that allows them to get on with their lives rather than wondering about their next paycheck.

Sadly, about the time Obama comes to the office with a stimulus plan that actually is suppose to employ people and create something (not just shovel money around), the State and local governments will be forced to slash their budgets creating a ripple effect that dwarfs what would have happened if GM and Chrysler went out of business.

I'd say happy holidays but it seems a bit out of place after my diatribe.

2008 Dec 24 01:26 AM

[Steve in Gr...:]

This is really unbelievable. Government adds almost no real value (except perhaps defense), but spends most of it energy killing the real economy (redistributive taxation, the Ponzi schemes of Social Security and Medicare, etc.). And we are supposed to be happy about government jobs?

2008 Dec 24 06:55 AM

[John Lounsbury:]

The role of government should be to create the environment that enables private commercial efficiency for the general good. I believe that is a statement of purpose with which most of our political leaders and citizens would concur.

There are two minority opinions with different purpose of government statements. One of these feels that the purpose of government is to provide for the general welfare. The second of these is that the role of government should be limited to national defense and not be involved in (interfere with) public commerce and welfare.

My statements regarding the two opposing minorities may be oversimplified, but please try to accept them so we can get to my final argument.

The problem I see with our body politic is that the two minorities keep exerting disruptive influence on the central objective. Witness social engineering activities with unintended consequences; wellfare destroying the incentive to work is one example. Deregulation of banking enabling the unintended consequence of creation of excessive leverage is another example.

It is the nature of human kind to gravitate toward ideology and so we tend, individually, to become captive to a set of ideas. A consequence of that tendency is polarization of thought, demonization of those with ideas posing contradictions to our ideas, and a predisposition to reject new ideas. I have said that we need less ideology and more idea-ology.

Thus ends my holiday message. Merry Christmas and Happy New Year to all!

2008 Dec 24 10:38 AM

[Austrian Sc...:]

Bad sign when government jobs are growing while private jobs are shrinking.

2008 Dec 24 12:53 PM

[fireball:]

diane
to err is human, to completely screw up takes government.
there has been much political propaganda blaming the free market. there was no free market. there has been no free market. the politicians pointed there to get most people to look anywhere but where the blame lies. government. ours is a gigantic sucking tick that has broken its' chains and has been sucking the life from the productive here for decades. it is the same crap as blaming oil (indirectly) for deficits and our staggering debt. the inept in washington want us to think they are forced to spend 700 billion in tax dollars per year for oil. another lie.
i do not suffer from obamamania. the course he has chosen is the same as usual. he appoints those (most) that were part of this mess. what change? bailout the banksters for years of donations? bail out the uaw for the same reasons? this is pure politics rotten to the core. he ran a scam on the altruistic young and the abysmally ignorant and won. i doubt mccain would have been any better but he is irrelevant now. until the u.s. wakes up to the fact that govtment is a poor servant and a dreadful master we will continue to get more of the same.
meet the new boss, same as the old boss....

2008 Dec 25 10:24 AM