Wednesday, October 13, 2010

A closer look at employment: State and Local Government

- by New Deal democrat

Yesterday we looked at construction employment, and saw grounds for a little optimism, in that the 5 year relentless decline looks like it may finally bottom out by next spring. The other sector that is hemorrhaging jobs is that of state and local government. Here the news is decidedly less positive.

The BLS divides both state and local government employment into education and non-education. Let's look at those in turn.

Turning first to state government, while states have protected their education establishment:

and indeed the YoY figures for state education employment show expansionary growth:

The story is decidedly not the same when it comes to non-educational employment:

As the YoY graph shows, the rate of layoffs in the last year has been increasing, not decreasing:

Turning to local government, the situation is even worse. Here is educational employment. Notice the cliff-dive last month:

On a YoY basis, last month gave us the worst annual rate of decline yet:

The same depressing story is told by non-education employment:

And again, the YoY rate of job losses has increased rather than decreased:

Because state and local government employment levels respond to tax receipts - which in the case of income and property taxes, are based on last year's income/value - they tend to lag other employment trends by about a year. That is why in the last several recessions, they were among the last sectors to turn down, and the last to turn up after the recession had ended.

For example, here is the graph of gains and losses in government employment on a monthly basis during the 1970s:

and here is the chart of the same data, showing that even after the economy began to recover from the deep recessions of 1973-74 and 1981-82, employees in government continued to be laid off:

Here is the same graph as to the 2001-03 recession and "jobless recovery":

and here is the chart of the same data, showing again that government employees continued to be laid off even into 2004, even after employment as a whole turned up in late 2003:

Additionally, the summer months of June through September, when budgets are being prepared, have in the past been associated with the worst layoffs. So it is possible that last month will be the worst single month of this decline. Nevertheless, this means that we should expect state and local layoffs to continue albeit not at the level of last month, and not necessarily every month, probably at least until next summer.

Bottom line: there is no prospect of state and local government job losses hitting bottom in the near future.