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Somewhat apropos of Doug Mataconis’ post from earlier today is the following the the WSJ: Unemployment Rate Without Government Cuts: 7.1%
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.
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It’s been very well documented that the public sector – both locally and at the state level – has been shedding jobs since 2009. This has been a significant drag on overall employment numbers and on spending and demand in our economy.
If you excise government jobs and the related income and spending from the economy you weaken aggregate demand. Our economy is currently anemic, yet it is still growing, just not at the rate we would like. In contrast, many European nations – Britain, Ireland, Spain, Greece, and Portugal are experiencing recession – because austerity policies are in place.
Wow, this takes misleading and apples vs. oranges to new heights.
The unemployment rate is measured by the household survey, which is derived from anecdotal polling and sampling and it includes non-payroll employment. The number of government workers, on the other hand, is measured by the establishment survey, which is derived from W-2 payrolls, sampling and seasonality adjustments.
You can’t take one number from one survey and juxtapose it onto the other survey and then draw a conclusion. At least not without being completely misleading and disingenuous. To say that unemployment would be X if Y number of state and local government workers still were on payrolls is like saying the New England Patriots would have been Super Bowl champions this year if the New York Yankees would have won the World Series the prior year.
Furthermore the raw math does not compute. They’re missing the other half of the payrolls equation.
State governments have to have balanced budgets. For the simple reason they have constitutional balanced budget mandates. When state governments run budget deficits something has to give. Now, they could keep the same number of workers. But in so doing it necessarily would be required for them to spend less money elsewhere. Inevitably that would mean that government contracts would be trimmed, not renewed or flat out canceled. It’s a mathematical certainty.
Similar analyses would apply to local governments.
When state government contracts are trimmed, not renewed or canceled that means that other workers lose their jobs: those employed by government contractors. When government contractors are forced to cut back that means their suppliers and vendors inevitably are forced to cut back. And their suppliers and vendors too. So on, so forth.
Nothing regarding the economy happens in a vacuum.
Ergo it’s completely misleading and disingenuous solely to focus on the reduction in state and local government employment. The other side of that coin is how many fewer private sector employees would have jobs if state government employment had remained the same.
@Tsar Nicholas: All the WSJ had to do was take the aggregate number of state and local jobs shedded then remove them from the aggregate unemployed. The difference is the change in the unemployment rate.
