Government Job Losses: A Mystery (Solved)

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THE STASH OCTOBER 2, 2009

Government Job Losses: A Mystery (Solved)

There's a bit of a riddle in today's unemployment release from the Labor Department. The release notes that government payrolls were down 53,000 in September, about one-fifth of the total jobs lost last month (which helped drive the unemployment rate up a tenth of a point to 9.8 percent). Now, as it happens, the cracker jack economists at Goldman Sachs actually anticipated this development yesterday, en route to almost perfectly nailing the overall job-loss figure. Here's how they explained the likely loss of government jobs (not online):

Although we do not usually forecast job changes by sector, it is worth directing some attention to a potential setback in state and local payrolls in tomorrow’s report.  September is the month when returning teachers (and other educational workers) show up in the payroll data.  Although most jurisdictions have tried their best to avoid outright layoffs in this area, they have also clamped down on new hires.  This suggests that we could see job losses on a seasonally adjusted basis, as jobs in this sector before seasonal adjustment normally rise about 14%, or roughly 290,000 at current levels of the workforce, between August and September.

So local governments normally bring on new teachers in September. Which means that, even if they're not firing them, weak hiring would lead to a decline on a seasonally adjusted basis--that is, relative to what normally happens this time of year.

That's almost certainly part of what's going on. But, when you read the Labor Department release, you notice this:

Government employment was down by 53,000 in September, with the largest decline occurring in the non-education component of local government (-24,000) [emphasis added].

Which leaves us with a bit of a mystery. Anyone have any theories?

Update: When in doubt, reach for the simplest explanation, I guess. I kind of assumed we were still in the stimulus sweet-spot for most state and local governments. (Not that they were flush, just temporarily stabilized.) But Catherine Rampell's chart over at the Times' Economix blog suggests the state and local aid wasn't sufficient to begin with--and that it certainly isn't now.

Dear Uncle Sam: Please send cash! 

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posted in: the stash, economy, labor, technology, goldman sachs, department of labor

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