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January 09, 2012

The Remarkable Public Sector Depression

Posted in: Uncategorized

It irks me to hear Democratic officials hail “private sector jobs numbers” or the “rebound in the private sector,” as if there are somehow two economies out there, and the amount of jobs up or down in the one where governments happen to sign the paychecks somehow has no bearing on the other. When cops and firefighters and teachers and nurses lose their jobs, they lose purchasing power. They lose the ability to hire private contractors or visit private businesses for the purchase of goods and services. Public employees don’t use a different currency or a different set of businesses. You cannot divorce them from the private sector.

And writing the public sector out of the equation like this really obscures the incredible nature of the depression in public sector jobs over the past few years. While looking for something else, I found this chart from Calculated Risk (click to enlarge):

The chart looks at public sector payrolls from 1973 to the present. As you can see, in the 35 years between 1973 and 2008, the public sector lost jobs only three times: twice during the recession of 1981-82, and then a small loss in 2003. Not only that, but the public sector routinely adds 200,000 or more to the payrolls every single year. In boom years that number can reach up to 500,000, as it did in 2001 (in the midst of a slight recession, mind you).

Now look at the last three years of the chart. From 2009-2011 the public sector has fallen every year. That’s completely unprecedented in generations. Even in 2011, when the private sector had its best year from a jobs standpoint since 2005, the public sector had a horrific time of it, losing more jobs than any year since 1981.

This is extremely abnormal. And it’s not likely to change – notice that the forecast in this chart is for a net loss of 100,000 more public sector jobs in 2012. That’s certainly an improvement over 2010 and 2011, but a catastrophic loss in historical terms, which would also be a record dating back to the 1981-82 period if it weren’t for the Great Recession years prior.

So what does this say? First of all, looking at the public sector numbers for themselves and not as part of trends obscures a lot. I took a little heat in my story on domestic policy in 2011 by citing Scott Lilly’s work showing that 2011 budget cuts cost 370,000 jobs. But the public sector only lost 280,000 jobs overall in 2011, so how can this be? Well, if you look at trend growth in the public sector, which is entirely natural because the population keeps growing, and the public sector must grow with it to provide the same level of public services, then you see 2011 as a year where the public sector dipped close to a half a million jobs below trend. And the same for 2010. So federal cutbacks, and the ripple effects they had across the public sector, could easily have accounted for that loss of jobs. And while an increase of 2,000 jobs among federal employees in December 2011 is good news, when the trend is for an average of close to 20,000 new public-sector jobs every month, that’s a cold comfort.

The public sector depression is also caused by the collapse of state revenue, and the cutbacks that resulted. Some of that will go away in 2012 as revenue gets rebuilt, but not all of it; Jerry Brown’s proposed budget in California calls for a permanent reduction of 3,000 state jobs. But the federal government has done very little to make up for the cyclical spending patterns of the states, by providing fiscal aid. Since the EduJobs bill in 2010, which only made up for a small portion of the state fiscal aid in the stimulus, nothing has moved. A state fiscal aid package that was part of the American Jobs Act stalled in the Senate.

We have never seen anything like this before, an expected fourth year in a row of public sector job losses. You can add to that a two-year wage freeze, at least among the two million-strong federal work force. The President will try to end this with a paltry 0.5% wage increase for Fiscal Year 2013, one that would actually save more money below the current spending cap, coming right out of the hide of the federal employee. Republicans want to pay for the payroll tax cut by extending that federal employee wage freeze another three years.

This is a horror show for the public worker. You have no job security, no raise to match the cost of living, and no real prospects for a comeback. And this of course has a massive impact, not only on the economy as a whole, since the public sector is a heavy chunk of the overall labor force, but on the people who rely on public services, which simply aren’t delivered in the same manner with this decimation in the work force.

And yet these workers, millions of them, have been consistently written out of the American story for the past few years. It’s because adding their statistics into the equation would be inconvenient for those defending the recent economic record. It’s because Democrats in Washington have swallowed the conservative argument that government doesn’t create jobs. It’s because nobody in power wants to blow the whistle on the devastating consequences of austerity, not only in Europe but right here in America. And so this invisible depression goes on, with the public worker not only humiliated, forced to accept, in many cases, the loss of their job security and wage bump and pension and collective bargaining rights, but forced to accept their own cancellation.


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