With the recent jobs report released by the Labor Department, it is clear that the government has been lacking in the jobs department for the past couple of years. While the private sector had a disappointing jobs gain of only 120,000 last month, the public sector lost 1,000. Moreover, the jobs reports over the years have shown a very disappointing trend in the job status of the public sector. With most of the local government’s revenue coming from income and housing taxes, it seems as though their recovery will not come for another couple of years.
If you take a look at the Labor Department’s numbers for the public sector over the past three decades, you can see an unfortunate trend. Between the years of 1990 and 2008, the public sector listed job gains for each year with the exception of 2003. However, since 2009 the public sector has been cutting their jobs at a fast rate each year. Specifically, in 2009 it cut 76,000 jobs, in 2010 it was 221,000 and in 2011 it was 265,000. If you total up all of these cuts, you can see that the public sector has shed nearly 600,000 jobs over the past three years.
Fortunately, recent jobs reports show that this cutting trend has cooled a bit, but not enough to spark the growth that is needed in our market. Specifically, in January of this year the public sector shed 2,000 jobs. In February, they fought that with a jobs gain of 7,000. Then, once again as you know, last month there was a 1,000 jobs loss. It’s clear to see that the government is making some headway, but it seems that it is flat-lining rather than gaining. On top of that, experts say that it will likely be a couple of years before we see the growth we need for a healthy, sound market.
There are a number of reasons why the public sector is being forced to cut back constantly, but the main issue is where the bulk of their revenue comes from. State and local revenues rely highly upon sales, income and property taxes. Since the recession is still in recovery, many of these outlets have suffered. Many people have lost their jobs and others are taking jobs where they earn less income. This means less spending and less revenue from sales tax as well as lowered revenue from income taxes. The property tax revenue probably doesn’t have to be mentioned since we all know what kind of state the housing industry is in right now.
As we continue to dig ourselves out of the Great Recession and move closer towards recession recovery, the public sector will likely improve with it. Patrick O’Keefe, director of economic research at accounting and consulting firm J.H. Cohn, notes how the state governments already seem to be picking up. He was quoted in the Chicago Tribune saying, “at the state level, where there’s a greater reliance on sales and excise taxes, revenues are rising.” Unfortunately, the local governments are still trying to pick themselves back up. It doesn’t help any that the local governments are the largest area of the public sector’s job market. In fact, the Tribune points out that the local governments contribute nearly two-thirds of the 22 million government workers in the U.S.
Even though there is a lot of work that still must be done in the public sector, it is important to note that it is improving. It will take some more time, especially as the housing and job markets improve, but it is likely that we will see small steps towards recovery each month. As with many factors regarding the job market and the economy, time will tell.
SOURCE: Chicago Tribune
IMAGE: Courtesy of CNN Money