Our Public-Sector Recession?

by Patrick Brennan

In the wake of the president’s comments that the private sector is “doing fine,” a debate has raged about where job losses have occurred, and the degree to which the private sector has supposedly recovered, but the public sector hasn’t. The president has insisted that the federal government must fill this gap, as if this might be a useful way to help solve the problems of the economy as a whole.

First, yes, U.S. government employment is down slightly in the aftermath of the recession, but it never saw anywhere near the losses which the private sector has. Here is the unvarnished truth of what has happened to comparable payroll numbers:

As the graph makes obvious, private-sector employment is recovering, slowly, but it’s still down significantly (and this is just raw number of payrolls, ignoring growing population). And despite the “recovery,” it’s down about twice as much from its pre-recession peak as government employment is. Not exactly “doing fine.”

Tino Sanandaji has an excellent post explaining, further, why the small decrease in government employment really can’t be used to explain overall labor-market weakness: The public sector is just insignificant in size compared to private payrolls. And, of course, the idea that rehiring teachers right now is crucial to economic growth is laughable. If the president wants more Keynesian stimulus spending, he should say so, and make that case, rather than pretending this is about directly addressing our unemployment problem or investing in our future.

#more#Furthermore, while there has been a steady but slow decline in public payrolls, leading some to claim that the president has been enacting austerity, it’s important to note that he has no active role in this. In fact, federal employment today is higher than it was before the recession:

And employment levels have basically stabilized at the state level:

Cuts continue to occur, though at a significantly diminished rate, at the local level:

The state and local numbers are notable for two reasons: First, the president likes to talk about firefighters and teachers being laid off, but of course, not all state and local workers are firefighters and teachers. State and local governments are often bloated, and as the graph above demonstrates, for instance, teachers have been no more susceptible to layoffs than any others.

Secondly, many governments are quick to resort to layoffs, and slow to rehire, precisely because of Democratic policies: Collective-bargaining contracts make it impossible to negotiate salary cuts, forcing governments to lay off junior employees in order to keep paying generous compensation to other workers. Secondly, because of the burdens represented by a union contract, governments can’t rehire until they’re sure their revenues have recovered for good. This dynamic can be seen at work in Wisconsin, where cities eschewed collective bargaining in order to avoid layoffs (as, in fact, erstwhile gubernatorial candidate Tom Barrett has done as Milwaukee mayor).

Finally, it’s essentially to be expected that state and local government employment will lag the economic recovery, for a variety of reasons. As I explained on NRO last fall, regarding the president’s education-jobs proposals, it’s irresponsible, and ultimately pointless, for Congress to let local governments postpone tough fiscal decisions.

The Corner

The one and only.