State and Local Governments Increase Jobs: Even the Experts Are Shocked

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by: TraderMark

I have to admit, I was taken aback by this story; my assumption was that unlike federal government, state and local governments, under the weight of massive budget deficits in much of the country, were cutting jobs. Or at least holding flat. but amazingly, despite an edict to have balanced budgets (and with burgeoning pension issues brewing) they have found the ability to increase employment.

The parallel universes of public and private employment continues to live; this will be a long tail implosion, but eventually this will come to a head - perhaps when the country has more public employees than private - or pensions begin to send city after city, and state after state into effective bankruptcy. [Aug 11, 2009: LA Times - Amid Cost Cutting, LA City Pensions Continue to Soar]

The U.S. is already 1/3rd public (if you include education and healthcare which essentially borrow on current and future taxpayers dime, to fund today's employment) workers. The 2/3rd private? Your world is not so nice - but as a generous folk, you are doing a heck of a job supporting the other 1/3rd. [Aug 14, 2009: No "New Normal" Say Some Economists; Prosperity Without Jobs?] The new paradigm economy - transferring money from private to public to subsidize the smaller portion (but growing fast) of the workforce.

So let me apologize for my prediction that state and local government would in fact see job losses for the first time in many a year. Very few businesses, which have to break even by law, would add jobs when they are losing money. Government appears to be one of them... but then again many states are using "stimulus" money to make up shortfalls, so I suppose through the backdoor, the federal government is really adding these jobs. Again, let me reiterate - it is imperative you raise your child to be a public worker. It seems the private taxpayer simply has an unending allowance to fund the public sector. Remember, at this point not 1 single net new job in the private sector has been created since 1999...

Does it ever feel like the country is a crack addicted junkie driving his car at 120 mph, swerving left and right but for now staying on the road? Maybe it's just me.

Via New York Times

  • 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.
  • Total employment in state and local government rose in 30 states, fell in 16 and was unchanged in four during the last year, the report found.
  • 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.

55,000 jobs lost in the worst downturn since the great depression... effectively 1000 per state. That's about equal to the amount of jobs lost in just 1 or 2 of our largest private employers.

Well I don't feel so bad about being wrong about this one; even the experts are shocked.

  • 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.
  • The report ... 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. States have been able to avoid shedding jobs with help from the more than $36 billion for fiscal relief they have received under the American Recovery and Reinvestment Act, the report said.

$36 billion here, $3 billion for clunkers there, $300M for appliances here, $75 billion for homes there. Just put in the IOU - I'll pay for all that later. The sad thing (and it's already forgotten) is just inside of AIG alone, we put $200 Billion (p.s. the stock is flying! thank you taxpayer) $300B into Citigroup ... (stock is flying! thank you taxpayer) - so you see how the US economy is now working. It's effectively just a transfer scheme. And just like in a Ponzi, eventually it ends because obligations (requests for withdrawal) overwhelm the ability to find new suckers to buy in as new "investors". Except in this Ponzi, we have the Federal Reserve to create new money to keep it going for ... if we're "lucky" - forever!

Again let me reiterate, I don't want people to lose jobs. And if we had any hope of ever paying off our deficit I can understand moving money from 1 shell to another - just as we have done with cars, homes, washing machines, et al. But since we're already broke... ah nevermind. Broken record.

  • The expansion, coming as many states and localities are raising taxes, troubled Tad DeHaven, a budget analyst for the Cato Institute, a libertarian research group in Washington. “That is disturbing,” Mr. DeHaven said. “Basically what you have is your producers in society losing their jobs and looking for work, and their tax burden isn’t necessarily going down — and as a matter of fact they are likely to face tax increases going forward — and government growing.”

An example

  • The disparity between the public and private sector job market is striking in places like Boise, Idaho. Since the recession began, the area’s unemployment rate has more than doubled, to over 10.1 percent in June, as big employers, especially in the technology sector, shed workers. The Boise area lost 20,000 jobs in the year ending in June, the Idaho Labor Department said, and saw real gains only in government, which had an increase of 1,400 jobs, mostly in the public schools.

Can't say much more - we've been on this issue since blog inception - I wrote a lengthy piece in April 2008 [Apr 2, 2008: The Underemployment Rate is Rising]. It simply seems to me, that unless something is an obviously painful shock to the system, many of the "slowly but steady" sea changes that happen to the economy like an erosion are not recognized by people. I guess we have to wait for the future shocks on this one too. Until then... kick the can. From the April 2008 piece...

Last point, we have 2 huge bureacracies - federal government and healthcare. HTo keep the government from going even more insolvent we should in theory be cutting jobs from these 2 white elephants. ealthcare costs spiral out of control and we hire more people - I believe healthcare is now 16% of GDP. But how do you cut costs without cutting jobs? Thats the other dark secret - most of our recent gains in jobs are either government or healthcare related. So how do you fix the long term problems in either? Chicken or egg? They are sapping our national wealth away by their huge excesses/costs BUT they also provide the main job growth as well. As with everything my expectation is the "kick the can down the road" theory will continue - keep growing these massive beaurocracies (create more jobs and costs now) and let another generation pay for it.