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Why the Unemployment Lines May Soon Grow Much Longer

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October 26, 2011 - Why the Unemployment Lines May Soon Grow Much Longer - By Elliott Wave International

For 4 years, government was hiring while the private sector was firing.

Even as a shrinking number of taxpayers meant declining revenues, many federal government jobs still paid more than an equivalent private sector position. Plus the excellent benefits, numerous days off, regular pay raises, and high degree of job security.

As the saying goes, "nice work if you can get it." But...

. . . that may soon change across all levels of government. The chart below suggests that trend in federal, state and local government employment appears to be reversing.

Government Workers

In June, government cut 39,000 jobs. And an Alabama Congressman told CNBC (Oct. 26) that while 15,000,000 private sector workers lost their jobs since 2008, only 100,000 government employees lost theirs in the same time frame. The August Financial Forecast says more government job losses are likely:

"The biggest contributor to government job growth over the last 50 years is at the state and local level...As real estate-based tax revenue continues to plunge and sales and income taxes get hit by another economic slump, the trap door will fly open for many who believed that government work offered shelter from the storm."

One such "trap door" appears to be in Chicago. MSNBC reports (Oct. 25) that Chicago's mayor wants to cut 500 city jobs. The city is expecting a $636-million shortfall in 2012.

Numerous other municipal "financial shortfall" stories have appeared in the financial press over the past several months. But Chicago's budget gap makes it clear that the crisis is not confined to small and medium sized towns.

We also know that many state budgets remain in crisis. And there's the $14-plus trillion federal debt.

Is the trend reversal in the decades-long government job growth part of a bigger deflationary trend? Will government layoffs mean unemployment rates well above the current 9.1%?

Our Financial Forecast and Elliott Wave Theorist provides analysis you will not find anywhere else, and helps you prepare for what few are expecting: a deflationary depression.

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