Government Job Loss: President Obama’s Catch 22

Jun 6, 2012 2:03pm

At the local level, Scott Walker’s victory in Wisconsin has shined a bright light on the role public employees – and benefits and pensions – play in state budget deficits.  The number of public employees has dropped in Wisconsin after Walker’s reforms. And it’s dropped in other states too.

But – and here’s the rub for President Obama – those same drops in public sector employment are contributing to the tepid job creation that’s standing in the way of his reelection.

It was actually the public, not the private, sector that shed thousands of jobs in May. While private businesses hired 82,000 people last month, federal, state and local governments wiped 13,000 employees from the payroll, according to Labor Department data.

“The government is actually contributing to the slow recovery,” said Scott Brown, the chief economist at the Florida-based financial firm Raymond James & Associates.

Brown said that if it were not for the “drag” of this public sector job loss, the economy would likely be growing a full percentage point faster, with GDP growing at 3 percent rather than at 2 percent.

“That would help mop up the jobs lost during the downturn,” he said. “Factor in the drag from government and we are growing at a pace that’s roughly enough to absorb the growth in population but not fast enough to make up much of the ground lost.”

But conservatives argue that cutting the government workforce, and thus the government spending needed to sustain it, gives the private sector more room to flourish.

“Any of the resources the government spends, it’s taking from the private sector,” said James Sherk, a senior policy analyst in labor economics at the conservative Heritage Foundation. “If the government takes fewer resources, then there’s more in the private sector for the private sector to invest.”

The vast majority of the public sector job losses have come at the state and local level, where balanced budget requirements coupled with plummeting tax revenues have caused many states to parse back the payrolls.

Since Obama took office, 636,000 state and local jobs have been cut. In 2011 alone, 113,000 jobs were cut in local schools, 68,000 jobs were cut in local government administration, and 78,000 jobs were cut in state government administration, according to a Commerce Department report.

“It’s the public sector that’s the thing contributing to that entire overall decline of jobs since he took office,” said Heidi Shierholz, a labor market economist at the left-leaning Economic Policy Institute. “It just wipes out a huge share of the job growth.”

But while state and local jobs evaporated, Labor Department statistics show that the federal government , not counting the postal service, has grown by 143,000 employees during Obama’s tenure, a fact that Obama’s Republican rival Mitt Romney is quick to criticize.

“That stimulus he put in place — it didn’t help private sector jobs, it helped preserve government jobs,” Romney said during a campaign event in Colorado last week. “And the one place we should have cut back was on government jobs. We have 145,000 more government workers under this president. Let’s send them home and put you back to work.”

During Romney’s tenure as Massachusetts governor from 2003 to 2007, he oversaw a oversaw a similar increase in the public sector, with the number of state government employees increasing 5.5 percent during his term, according to the Massachusetts Office of Labor and Workforce Development.

Looking solely at the increase in non-postal-service federal employees during Obama’s tenure, the president has overseen a 5.1 percent increase in size of the federal workforce.

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