Federal Job Cuts Are Not Just Biting Inside the Beltway

By :: February 3rd, 2014

Government employment is down again. But while cuts in state and local jobs drove the decline in 2011 and 2012, the federal government is the culprit now. The federal workforce has decreased about 3 percent, or 75,000 positions, from last year. That’s in sharp contrast to the slightly positive growth (0.3 percent) for the state and local sector.

Overall, government employment has not grown for five years when you take out temporary workers hired to take the census in 2010. After this adjustment, there are 730,000 fewer government jobs since the peak in January 2009, with about 10 percent of the decline coming from federal employment and 90 percent from the state and local workforce.

Interestingly, many of the states taking the hardest hit from the loss of federal jobs were not in the DC area. By Census region, the biggest declines came in the south and west where federal employment makes up about 2 percent of total jobs.  From December 2011 to December 2013, the federal workforce was cut by 37,300 in the South (chart). Many of the losses were in civilian defense jobs.

fed cuts in employment

A great table in our last State Economic Monitor shows that only six states had no net loss of federal jobs: Idaho, New Hampshire, North Dakota, Utah, Vermont, and Wyoming.

Not surprisingly, California and Texas, the largest states, had the biggest decline in federal jobs in absolute terms.

But in terms of percent change, Alaska had the largest contraction, losing almost 8 percent of its federal workforce in December 2013 compared to a year ago. Others taking a big hit, declining by more than 4 percent: Arkansas, Kansas, Montana, New Jersey, and Washington.

None of the states in the Washington DC metro area are even in the top ten measured in terms of percentage losses: DC is 15th, Virginia 28th and Maryland 43rd.  However, because the federal government makes up 28 percent of the workforce in D.C., a proportionately small decline in federal jobs translates to over 6,000 jobs.

Alaska is similar: Federal employment represented fully one-fourth of the total workforce, so the 1,200 jobs lost in December disproportionately affected the economy. The federal jobs also tended to be higher paying and more stable than other Alaskan work.

Although overall state and local employment increased in 2013, twenty-two states reported a decline from the prior year. This loss of human capital has already begun to affect government services, most alarmingly education, which accounted for 60 percent of the local government decline in employment from 2009 to 2013.

Thus while our economic monitor shows some cautious improvement in other employment indicators, declining public sector employment, particularly in the federal government, continue to drag down the recovery.

8Comments

  1. Michael Bindner  ::  3:07 am on February 4th, 2014:

    As telling is the decline in contract employment – especially in government training but also in other forms of direct contracting. There are quite a few discouraged workers out there who have either simply retired or have taken jobs they never thought they would do. (would you like extra butter on your popcorn?) Much of this has come from ill-considered budget deals which included or maintained the Sequester. Hopefully, this will soon be over with the latest deal which rolled back the trend toward retrenchment.

  2. Vivian Darkbloom  ::  10:53 am on February 4th, 2014:

    “The Urban-Brookings Tax Policy Center aims to provide independent analyses of current and longer-term tax issues and to communicate its analyses to the public and to policymakers in a timely and accessible manner. The Center combines top national experts in tax, expenditure, budget policy, and microsimulation modeling to concentrate on four overarching areas of tax policy that are critical to future debate”

    With that in mind, what does this Op-Ed by Norton Francis have to do with the TPC’s mission? Len Burman, why are tax deductible donations made in reliance on that mission statement being expended on matters that have nothing to do with the TPC’s stated purpose or the expertise of its members?

    Not only that but Francis concludes this piece with a complete non-sequitur:

    “Thus while our economic monitor shows some cautious improvement in other employment indicators, declining public sector employment, particularly in the federal government, continue to drag down the recovery. “

    That conclusion that declining public sector employment , particularly federal employment over the past two years, “continue to drag down the economy” appears to be based more on ideology than on anything else rather than the facts preceding it. What is the total decline in federal jobs since the peak in percentage terms of the total employed workforce of 160 million? Does it matter at all that those 75,000 federal employees (and state and local employees) must be paid from the taxes generated by the private sector or borrowed from funds to be repaid in one fashion or the other by the private sector? Does this have any effect at all on the prospects of someone in the private sector to gain employment? One wonders what the ideal number of government employees is that would satisfy Francis’ macro economic ideal for a more robust recovery?

    It’s not clear, because Francis doesn’t describe by exactly which measure or effect he believes the decline of federal employment “continues to drag down the economy” (state and local government employment grew over the past year). As a decline in overall GDP? GDP is generally not directly affected by government employment. Those services don’t enter into the GDP equation and government employees don’t manufacture goods. As a decline in potential GDP? Here, one would have to believe that the additional consumption demand of those spent salaries, on net, offsets the negative effect on consumption of the taxes and future taxes needed to pay those salaries (calculating that might be a good job for someone at the TPC). If a greater number of government employees is the answer to our economic woes, why don’t we just become France? Or, since, as Francis indicates the decline is federal employment is due to the civilian military defense jobs, why don’t we start another war?

    Actually, during the period in question, as measured both by GDP and by unemployment, the US economy has not been “dragged down” but has been “dragged up”. GDP has grown in every quarter since “the peak of public sector employment in 2009” and the overall unemployment rate has declined. Two states noted as the poster children of the ill effects of lower federal government employment (Maryland and Virginia) have lower than national average unemployment rates.

    I’ll leave it to macro economists to debate cause and effect of this and I’m sure that those “experts” will come up with conflicting stories. At least some of those will try to base their conclusions on a bit more analysis than we find here.

    In the meantime, I find it hard to believe that an estimated reduction in total government employment from January 2013 (21,858,000) to December 2013 (221,849,000) that is, a total reduction of 9,000 in a job market of about 160 million, supports an unqualified conclusion that this “continue(s) to drag down the recovery”.

    Finally, as a matter of budget policy, an issue much more closely related to the TPC’s actual stated mission, I wonder whether this reduced employment has had similarly unfavorable effect of continuing to “drag them down”.

  3. AMT buff  ::  8:08 pm on February 4th, 2014:

    The most objective barometer of federal government employment trends is the DC area real estate market. That market has been the hottest in the country since 2008.

  4. Michael Bindner  ::  3:00 am on February 6th, 2014:

    Houses, yes. Condos, not so much. There may be activity, by price is still off by about 20% (or more).

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