Government in US continues historic contraction

UPDATE:  This from the New York Times.

FOR the first time in 40 years, the government sector of the American economy has shrunk during the first three years of a presidential administration.

The latest job numbers out today show only a modest uptick in private sector employment, but they also give another indicator of the on-going, historic contraction in government work.

From April of last year to April of this year, the Bureau of Labor Statistics found that government at all levels shed another 215,000 jobs.

That continues a sort of stealth austerity movement that began in earnest as the Obama administration’s stimulus program — which provided massive subsidies to state and local agencies — began to phase out.

We’ve seen it reflected here in the North Country, as school districts, counties, and state agencies have implemented hiring freezes, left empty positions unfilled, and laid off hundreds of workers.

The trend has slowed in recent months, which suggests that the public sector may be stabilizing.  This could reflect the fact that most state income tax revenues have finally recovered to levels approaching record highs in 2008.

But property tax revenues — which fund school districts — continue to lag and that may be reflected in continuing job cuts among teachers in the US.    Layoffs among K-12 teachers took the largest hit within the public sector over the last year.

In most parts of the country, the downsizing of government may have slowed the recovery, but it doesn’t appear to have derailed it entirely.  Yet in some pockets, the trend may be more damaging.

While most states saw employment expand significantly in the last year, Wisconsin lost a net total of 23,900 jobs and the vast majority of them — 17,800 — were cut from government agencies.

That’s not exactly priming the pump.

One question going forward is whether the national debate over stimulus vs. austerity might not be a little too simplistic.  Perhaps most of the country is recovering, albeit too slowly, without a new wave of government hiring or spending.

But there might be some parts of the US — Florida, Nevada, North Carolina, Wisconsin — where some economic caffeine is still needed.

There are also many pockets within states that are lagging badly, from inner city neighborhoods, to rural small towns — and those areas have been stung particularly badly by government layoffs.

What do you think?  Is it a good thing overall that our government is getting smaller?  Should there be another stimulus?  How about a targeted stimulus plan that identifies parts of the country that need a boost?  As always, comments welcome.

Tags: economy, politics