Relevant and even prescient commentary on news, politics and the economy.

Private-Sector Employment in Jobless Recoveries

I still think Obama is toast—a result of his own making, since he’s really the apotheosis of a government-hating Republican who never tries to do anything because he’s afraid it would succeed.  He’s basically Jon Huntsman, economic policy and all, with a slightly better social policy—or at least a willingness not to try to compete globally in the 21st century using employment policies that were outdated in the 19th. (Short version: you might be able, in general, to exclude 55% of your potential workforce—women and gay men—if you have the population of an India or a China. You can’t do it when you have 1/3 or less of their population; you need a market that is open to everyone, which means you need social policies to match.)

But there are way in which he is a Bad Republican (traditional definition—think Gerald Ford’s Presidency), and those, as much as anything else,are what has destroyed his re-election chances.  Not to mention U.S. employment data.

I’d like to think I’m wrong, but let’s look at the data, comparing the last three recessions: the ones with so-called “jobless recoveries.”  In the grand tradition of Mitt Romney, let’s look at job growth over the following 24 months.*  First, the Private Sector:

joblessrecoveries001Private

The first thing we notice is that The George W. Bush-Mankiw-Hubbard “Recovery” Really Massively Sucked for U.S. Private Sector Employment.** Two-thirds of those post-recession months were negative, and the negatives were more than 1/3 again worse than the gains.  Even the 24 months that follow the 1980 recession—half of which were the first 3/4 of the 1982 recession—show a net positive gain in Private Sector Employment.

But the second thing is that the Obama Administration really isn’t doing that poorly in Private Sector Employment. It’s rather similar to the George H. W. Bush Administration.***  The loss months are slightly more severe than the gain months (about 5%), but there are 2 gain-months for every loss-month.  It’s still a “jobless recovery”—as was the post-1991 era—in that producing slightly over 1,000,000 jobs in a 24 month period is falling behind the growth in available workers, but it’s not a disaster, if the criterion is the recovery of private-sector hiring.

Sadly for BarryO—again, I consider this what the tennis-playing Brad DeLong calls an “unforced error,” a direct result of the errors of his priors—there is also employment in the non-private sector.  Which both Bushes knew that, the “small government Democrat” appears not to:

joblessrecoveries002Public

On a proportionate basis, George H. W. Bush oversaw as large a post-recession expansion of Government workers as Barack H. Obama has overseen a reduction in those workers.  This is even before one considers that at least three of those six positive months—a figured dwarfed by W’s 15 months of public-sector worker increase, let alone his father’s 19 months—are due to temporary hiring of U.S. Census workers. March, April, and May of 2010 show net gains because of Federal hiring that is more than completely reversed by September.  Great “Recovery Summer,” that was!

But if we really want to be fair to Barack Obama, we would have to break this down further.  After all,while the data is national, the breakdowns are not always so:

joblessrecoveries003PublicBreakdown

Federal government employment—now including the ever-expanding Department of Homeland Security, and with a military that continues to fight (at least) three wars—has been essentially flat during the “recovery”period.  The damage has been done extensively at the State and, especially, Local levels.

Part of this is simply that the 2007-2009 recession was longer and deeper than the other two (18 months long v. 8 for each of the previous two; more than 7.5 million private-sector jobs compared to just over 1 million in 1991 and just under 2 million in 2001).  That’s a lot more time and a lot less money flowing into taxes and budget-balancing requirements.

But if I were Barack H. Obama, and if I really wanted to be re-elected, the speech I would be giving tonight wouldn’t be about extending tax credits or capital amortization credits—with or without the idiocy of budgetary offsets—but direct state aid. Billions of dollars of it.  Without offsets. The speech would run something like this:

The latest few years have been difficult for you.  Almost every state in the Union has to balance their budgets, and with record levels of unemployment and job losses, that’s not easy to do.  So they made decisions that affected you, your children, and your friends. They laid off police officers, firefighters, teachers, librarians, surveyors, road repair personnel, and trash collectors. They’ve cut back hours at the DMV, Social Security, and Employment Offices.  They’ve made it more difficult to get an appointment to get health insurance for your children, support to buy healthy food for you and your children.  Your classrooms are more crowded, your property taxes are higher, and you’re getting less for your money while you have to put in more effort.

The Federal Government doesn’t have to balance its budget, and the bond market has given us a rare opportunity to borrow money for less than it will cost us.  I plan to take full advantage of that now, so that your children will have food, your streets will be safer, your opportunities for education will be greater, and the services for which you pay will be more available.

The private sector is rebuilding and restaffing, but that will—as it has in the past, as it almost always does—take time.  But they cannot rebuild if there is no demand, and you cannot demand things if you cannot pay for them. So, along with $1T in infrastructure improvements to be made over the next 15 years, I will tomorrow send a bill to Congress to triple the total of the two previous grants-in-aid to the States that were made as part of the ARRA.

Now you have heard many people—and to my shame, I am one of them—who live in fear of deficits. They pretend that the government “has to be like a family”—a family that never takes out a mortgage, never borrows to buy a car, never needs a loan to pay for schooling or training, and never uses a credit card.  I’ve seen families like that. They live on the streets of Honolulu and New York City and Chicago and Washington, D.C., and Richmond, Virginia, and Cincinnati, Ohio, and Detroit, Michigan, and Paint Creek, Texas.  They’re impoverished.

The United States is not impoverished, and I will not allow it to become so. We will rebuild opportunity now and build our superhighways—information and otherwise—for life in the 21st and 22nd Centuries.  The bankers—grateful for the bailouts that have been heaped upon them by my predecessor and myself—are willing to loan us money for less than the cost of inflation. We would be foolish not to borrow.  Even as those of you who can are refinancing your houses, the U.S. government will—as families do and should—borrow now to make a better life for our children and their children.

We have a unique opportunity. We have massive unemployment because the states do not have the money to employ and hire workers—workers who help keep our streets and homes safe, who keep our roads in good condition, who educate our children, who find us opportunities for work and ways to keep us healthy so that we can do that work.  And the bankers are telling us, “We will give you that money for free!”  And some people are telling you that we should not take that money.

We have given the bankers enough.  Now, they are willing to Pay It Forward, to give some small portion of that money back to us for less than it will cost them to do it. I intend to take that money and use it to make a better present—and the chance for a better future—for the American family.

Yeah, I want a pony, too.

*All data following derived from FRED(R).
**Let us leave aside whether this was a feature or a bug of that Administration
***It is left as an exercise that GHWB was a one-term president.

Tags: , , , , , , Comments (15) | |

State and local governments should be listed as a primary risk to the US outlook

I don’t see why the aggregate state funding gap is not numero uno on the ‘risks’ to the US outlook (I usually hear oil, Europe, China, etc., in my line of work). According to the Center on Budget and Policy Priorities, the State budget gap is not expected to clear at least through 2013. From the CBPP report “States Continue to Feel Recession’s Impact“:

Three years into states’ most severe fiscal crisis since the Great Depression, their finances are showing the clearest signs of recovery to date. States in recent months have seen stronger-than-expected revenue growth.

This is encouraging news, but very large state fiscal problems remain. The recession brought about the largest collapse in state revenues on record, and states are just beginning to recover from that collapse. As of the first quarter of 2011, revenues remained roughly 9 percent below pre-recession levels.

Consequently, even though the revenue outlook is better than it was, states still are addressing very large budget shortfalls.

Better put: state revenues are rising more quickly than expected from a low base following the most precipitous drop ‘on record’. Not feeling too confident here.

(MORE AFTER THE JUMP)


Whether or not this ‘surge’ will continue depends on the labor market, corporate profits, and retail sales – heck, aggregate demand. There’s an obvious connection between retail sales and state sales tax revenue, and retail sales are weakening. In May, the pace of the 3-month moving average of retail sales slowed to 0.27% (from a peak of 1.09% in October 2010), while that of real retail sales fell 0.11% over the month (raw data here). Lower gas prices will help; but without significant relief in the labor market (from the private sector), the pace of revenue growth is unlikely to be maintained.

It’s not just the states – the health of state and local government’s (or lack of) matters A Lot for the US economy.

On average, state and local governments jointly are the largest single contributor to aggregate compensation in the 1990’s and 2000’s (roughly), according to the Bureau of Economic Analysis.

Since 1987, State and Local governments have accounted for an average 13% of total compensation of the US economy. So the outlook for 13% of aggregate compensation essentially depends on jobs growth in these sectors.

The trend for job growth has been decidedly negative for state and local governments. State and local governments have net-fired workers every single month since November 2010.

State and local governments are doing something they’ve not or rarely done before: hinder nonfarm payroll growth. In May 2011 (the latest data point), state and local governments dragged annual total payroll growth by 2% and 20%, respectively. Local government payroll was 11% of the total in May. This is not good.

Federal government support to state and local governments is set to decline significantly next year (see figure 2 on html of CPBB report). So it’s up to the private sector to provide sufficient income growth to offset the likely decline (latest data is 2009) by the giant of aggregate compensation, state and local governments, for years to come. I’m skeptical.

Rebecca Wilder

Tags: , , Comments (15) | |

McConnel is partially right about Government Employment

McConnell is Partially Right About Government Employment

David Weigel listens to Senator McConnell so we don’t have to:

Weigel says:

I looked at the government employment data provided by the Bureau of Labor Statistics and it is true that most of those working for the government work for state and local government. As our table shows, total government employment during February 2011 was 22.217 million (down from 22.582 million as of January 2009) whereas Federal employment was only 2.856 million (up from 2.792 million as of January 2009). Federal employment grew by only 64,000 which was more than offset by the fall in state government employment. Local government employment fell by 352,000 and total government employment fell by 365,000. Not exactly consistent with the message that the Senator was trying to convey.

McConnell’s quote below the fold:

“Unemployment among government workers is about 4.5 percent,” said McConnell. “Most of those government workers work for state and local government. The federal government over the last two years has added 100,000 employees. The only industry in America that’s not sacrificing in this current downturn is government employees. I can’t tell you some federal worker won’t be affected by reducing government spending, but we have largely insulated the federal government from this recession.”

Tags: , Comments (0) | |