Unemployment rate without Government cuts (GOP gift to Obama and the rest of us): 7.1% - WSJ

[Bill USA]

(emphasis my own)
http://blogs.wsj.com/economics/2013/03/09/number-of-the-week-unemployment-rate-without-government-cuts/

7.1%: What the unemployment rate would be without government job cuts.

While most industries have added jobs over the past three years, the recovery has largely bypassed the government sector.

Federal, state and local governments have shed nearly 750,000 jobs since June 2009, according to the Labor Department‘s establishment survey of employers. No other sector comes close to those job losses over the same period. Construction is in second worst place, but its 225,000 cuts are less than a third of the government reductions. To be sure, construction and other sectors performed worse during the depths of the recession, but no area has had a worse recovery.

A separate tally of job losses looks even worse. According to the household survey, which is where the unemployment rate comes from, there are nearly 950,000 fewer people employed by the government than there were when the recovery started in mid-2009. If none of those people were counted as unemployed, the jobless rate would be 7.1%, compared with the 7.7% rate reported on Friday.

of course if there were 950,000 more people employed their combined spending would impact business sales to an extent that would lower the unemployment rate a bit more (the multiplier effect). Thus, the unemployment rate might drop from 7.1% to something below 7%.

[Igel]

1. But most of the job losses are state and local governments.

And the losses were because they couldn't run a deficit (even if some states found creative ways to circumvent their constitutions), and even in a year with a $1.2 trillion deficit the federal government wasn't going to buy out their deficits.

The stimulus bought out the effect in the first year, and added a few jobs, to boot (meaning that mid-2009 #s are likely to be pretty much a high point in government employment--always nice to take a maximum as baseline). Typically brief recessions have little effect on government hiring--the effect is smaller and smeared over a couple of years. Long-term downturns result in reduced government employment. It lags revenues.

Local and state revenues are up. That means government hiring will be up--provided that they can compensate for any sequester effects and entitlement spending doesn't gobble up the increased revenue. In more than one state Medicare/Medicaid spending has to increase to qualify for additional federal funds. It may bring a net gain to the state, but it means dedicating additional revenue to healthcare. If that shows the same "multiplier" (a number that's reported, depending on source, from being far below 1 to being nearly 2), then it doesn't matter if the money's spent as healthcare or worker.

[Bill USA]

2. Last time I checked State and Local Governments are still counted in employment numbers

Last edited Mon Mar 11, 2013, 05:35 PM - Edit history (1)

Federal Government cuts to programs which support state run programs is a big part of the reason for State and local cuts - required by Republican demands for sabotaging the recovery - Er, I mean demands for fiscal restraint.

(Remember a few years ago when Republicans were saying [font color="red"] "Deficits don't matter"? [/font]).

Meanwhile, rational considerations have driven most economists* to urge deficit spending and against austerity to reduce the severity of the Trickle Down Deregulation disaster (aka the Republican Dystopia) and to stimulate a recovery from same.

*

(see: 350 Economists Warn the President & Congress: The Economy Needs Growth and Jobs, Not Austerity : http://www.democraticunderground.com/101657217)

and "Alan Blinder on How to Worry about the Deficit: "Don't" http://www.theatlantic.com/business/archive/2013/01/how-to-worry-about-the-deficit-1-dont-2-wait-a-few-years-3-then-worry-about-healthcare-costs/272521/

and...
How did we Know the Stimulus was too Small?.....
http://krugman.blogs.nytimes.com/2010/07/28/how-did-we-know-the-stimulus-was-too-small/

Here's an interesting article on unprecedented Decline in Public sector employment compared to previous recessions:

PUblic Sector Austerity in one Graph

http://www.washingtonpost.com/blogs/wonkblog/post/public-sector-austerity-in-one-graph/2012/06/11/gJQAv89NVV_blog.html
?uuid=uf7gPrP6EeGBuV3_cCjgZg

... and ...

A Record Decline in Government Jobs: Implications for the Economy and America's Workforce - Brookings Institution http://www.brookings.edu/blogs/jobs/posts/2012/08/03-jobs-greenstone-looney

To examine the direct consequences of lower government employment, consider the case in which employment had hewed to its historical level. Between 2001 and 2007, the average ratio of government employment to population was 9.7 percent. Had that share remained steady, government employment would have been more than 23.6 million in June 2012 as compared to its actual level of 21.9 million. That is, employment would be 1.7 million jobs higher today if the share had remained constant, and the unemployment rate would be 7.1 percent instead of the current rate of 8.2 percent (see graph below).

[Igel]

3. Yes, they are.

Which is the point.

The GOP isn't in charge of a number of states that have lost a large number of state and local employees. The claim is that the feds are responsible for making sure no state ever has to cut state/county/city workers, which is an odd sort of claim.

The problem is that in long downturns state/local revenues decline. As they decline, the states have to keep a balanced budget. So there's the inevitable consequence of a balanced budget. This is no more a (R) than a (D) issue. It's a local issue, one caused by having states not having a bailout in case they default.

During short declines like in 1991 and 2001 states don't have enough time to react. The stimulus in 2001 bailed out states, just like the stimulus in 2009 did, so that was fine. (In fact, IIRC there was an uptick in hiring as a result of a continuation of previous trends in hiring--a foolish continuation of a trend that just made the budgets even more out of whack the following year, making for even steeper cuts).

But not all of the lay outs and attrition was just to declining revenues. Obligatory, non-discretionary spending increased those years and couldn't be cut--this included unemployment insurance and health benefits. In TX, at least, they continued to climb, so even as they were cutting 10s of thousands of teaching jobs a couple of years ago they increased health spending. They wound up using a sort of trick, not funding the last 6 months (I think it was 6) of Medicaid for the two-year budget, hoping that this year they'd find a solution. The solution was increased revenues, so part of the increase is being used to backfill this year's Medicaid budget. The point to this is that it wasn't cutting spending that was the problem, not entirely. The problem was also increased costs in one sector of the budget that was sacred.

Fixed income if you don't raise taxes. Reduced revenue. Increased expenses. Something has to go. The (R) contribution to this in TX was not wanting to raise taxes. The increase needed to fund health and not cut education would have been pretty steep.