No Government Jobs Recession Yet

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When the Bureau of Labor Statistics released its September jobs report earlier this month, one line stood out to anyone scrolling down the columns of figures looking for good news. Government jobs grew by 9,000 across the country last month. A modest gain, but it represented the eighth straight month of public sector job growth, and the 11th in the last 12 months. Even as the private sector has shrunk by some 760,000 jobs this year, government headcount is up by about 200,000. Over the past year, government employment has now increased across America by 1.4 percent. Had the private sector grown similarly, we’d have added 1.62 million jobs.

Thank God for the public sector, is all I can say.

One sign of the good news is that even in places where the private economy is shrinking rapidly, government continues to expand. California, for instance, is plagued by a collapsing housing market which accounted for 28 percent of all U.S. subprime mortgage foreclosures in the first quarter of this year. The state’s unemployment rate is a whopping 7.7 percent. Legislators have been grappling in Sacramento with a $15 billion budget shortfall for months, and recently Gov. Schwarzenegger said he might need to ask the federal government for a $7 billion loan to tide the state over. No matter. The public sector continues to add jobs, albeit modestly, in California--a ray of hope in an otherwise dismal economic picture.

The scene is much the same in New York State. Although the Empire State might be seen as ground zero for the current fiscal crisis, given the collapse of institutions like Lehman Brothers and the general turmoil on Wall Street, public sector employment is holding up rather well, and state leaders seem determined to keep it that way. The state’s Assembly has already voted in favor of a tax increase on those earning more than $1 million—though no one knows how many millionaires will be left in New York after the turmoil in the markets. The state’s governor, trying to avoid tax increases which he thinks would further harm the local economy (what’s up with that?), is instead appealing to the federal government to send billions of dollars to New York. That would keep government programs and public sector jobs buoyant amidst the worst financial crisis since the Depression.

What’s happening in New York and California is characteristic of the rest of the country. More than half of the states have faced budget deficits this year, including more than a dozen which adopted what turned out to be overly optimistic budgets and suddenly confronted big shortfalls in mid-year tax collections. Fortunately, local government hiring is up a robust 1.5 percent in the last 12 months. Where would those states be without all those extra government jobs at a time like this?

There’s more good news. These aren’t just any jobs, not low paying jobs or dead end jobs. These are good jobs. A few years back, for instance, the Citizens Budget Commission, a New York group, compared public and private sector wages throughout the New York metropolitan region and found that public workers on average received 15 percent higher wages for the same jobs. Adding in benefits, the differences are even more striking. The nonpartisan Employee Benefit Research Institute concluded in a 2005 study that the average state and local government worker gets 46 percent more in compensation than the average private sector worker. Underlying that difference are stark contrasts in benefits spending, such as spending on employee retirements which cost governments 162 percent more per worker more than what private employers pay.

Faced with threats to this robust sector, state officials and policy experts have begun arguing that the federal government, which is allowed to run budget deficits (and is doing quite a good job at that), should be pouring aid into the states, even at the cost of further increasing the red ink in Washington. Otherwise states would have to raise taxes (which, after all, government workers pay too), cut spending, reduce services, and trim wages and benefits.

A few killjoys have argued that the federal government shouldn’t be so quick to subsidize further state budget gaps because Washington’s own deficit is scheduled to double in the next few years, even without accounting for the $700 billion bailout that’s supposed to save our financial system from ruin. Instead, the critics argue, state governments should respond to the crisis by having workers do more with less, while local government leaders might seek innovative solutions like managed competition and competitive bidding of public services to bring down costs and headcount. Elected officials might also bring public sector benefits packages in line with the private sector.

But I say, what are these critics trying to do, kill the one bright spot in our economy?

Steven Malanga is an editor for RealClearMarkets and a senior fellow at the Manhattan Institute

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