Commentary | Jobs and Unemployment

Priority No. 1 for job creation: Aid to state and local governments

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We are fast approaching the five-year anniversary of the official start of the Great Recession in Dec. 2007, and it has been more than three years since its official end in June 2009. The job market, however, remains extremely weak. The unemployment rate is still over 8 percent and the labor market needs 9.7 million jobs to get back to the pre-recession unemployment rate.

In a recent EPI analysis, my colleague Josh Bivens and I compare the current recovery to previous recoveries to see how the current recovery stacks up and to identify obvious policy measures that could ameliorate today’s job crisis. We find that the most glaring source of weakness in the current recovery relative to previous recoveries is the unprecedented public-sector job loss of this recovery. The figure below compares public-sector job changes in the current recovery to public-sector job changes in each of the last three recoveries, demonstrating that public-sector losses are an enormous drain on the current recovery that was not weighing on previous recoveries.

How many more jobs would we have if the public sector hadn’t been shedding jobs for the last three years? Taking into account the number of jobs the public sector has shed since the recovery began (more than 600,000), plus the number that should have been added to keep up with population growth (more than 500,000), we are now down more than 1.1 million public-sector jobs. Add to that the number of jobs lost in the private sector due to the ripple effects of direct public-sector job loss (around 750,000 jobs) and the number of private-sector jobs lost due to the ripple effects of cutbacks in transfer programs (more than 400,000 jobs), we find that if it weren’t for state and local austerity, the labor market would have on the order of 2.3 million more jobs today. Fully half of these jobs would be in the private sector.

These 2.3 million jobs make up more than one-fifth of our 9.7 million jobs gap. If all of these 2.3 million jobs had been filled, it is likely that the unemployment rate would now be between 6.7 percent and 7.5 percent instead of over 8 percent, and the labor force participation rate (which has dropped dramatically in recent years due to weak job opportunities) would be up to three-tenths of a percentage point higher than it is.

The public sector continues to shed jobs today, causing job loss throughout the economy. To reduce these losses and the suffering for American families they cause, Congress should provide aid to state and local governments to keep austerity in that sector from continuing to weigh down the recovery.

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