WSJ Columnist: Government Layoffs Making Unemployment Rate Much Worse

From the Wall Street Journal, columnist Justin Lahart takes a look at how state and local job losses drove up the unemployment rate. Let's remember that the states run by Republican governors insisted on paying for tax cuts by laying off

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From the Wall Street Journal, columnist Justin Lahart takes a look at how state and local job losses drove up the unemployment rate. Let's remember that the states run by Republican governors insisted on paying for tax cuts by laying off government workers, and that the Republicans in Congress and their Blue Dog enablers who blocked government spending to the states did their part, too. (Remember "jobs, jobs, jobs"? Thanks, Grand Old Piranas!)

One reason the unemployment rate may have remained persistently high: The sharp cuts in state and local government spending in the wake of the 2008 financial crisis, and the layoffs those cuts wrought.

The Labor Department’s establishment survey of employers — the jobs count that it bases its payroll figures on — shows that the government has been steadily shedding workers since the crisis struck, with 586,000 fewer jobs than in December 2008. Friday’s employment report showed the cuts continued in April, with 15,000 government jobs lost.

But the survey of households that the unemployment rate is based on suggests the government job cuts have been much, much worse.

In April the household survey showed that that there were 442,000 fewer people working in government than in March. The household survey has a much smaller sample size than the establishment survey, and so is prone to volatility, but the magnitude of the drop is striking: It marks the largest decline on both an absolute and a percentage basis on record going back to 1948. Moreover, the household survey has consistently showed bigger drops in government employment than the establishment survey has.

The unemployment rate would be far lower if it hadn’t been for those cuts: 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%.

Ceteris is rarely paribus, of course: If there were more government jobs now, for example, it’s likely that not as many people would have left the labor force, and so the actual unemployment rate would be north of 7.1.

Economist Jared Bernstein adds:

A few additional points, if I may:

  • these are real jobs by real people of the type you see everyday when you drop your kid off at school, get a speeding ticket (whoops…bad e.g., but you know what I mean), or pass a firehouse. You see their work when you go to a soccer game at a public field that’s in decent shape or stroll in a public park.
  • there’s a significant multiplier to state and local spending, both in terms of contracting out work to private entities and spending by public workers in their communities (Zandi puts it at 1.4–for a dollar of state fiscal relief, GDP grows $1.4).

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