By Justin Lahart
One reason the unemployment rate may have remained persistently high: The sharp cuts in state and local government spending in the wake of the 2008 financial crisis, and the layoffs those cuts wrought.
The Labor Department’s establishment survey of employers — the jobs count that it bases its payroll figures on — shows that the government has been steadily shedding workers since the crisis struck, with 586,000 fewer jobs than in December 2008. Friday’s employment report showed the cuts continued in April, with 15,000 government jobs lost.
But the survey of households that the unemployment rate is based on suggests the government job cuts have been much, much worse.
In April the household survey showed that that there were 442,000 fewer people working in government than in March. The household survey has a much smaller sample size than the establishment survey, and so is prone to volatility, but the magnitude of the drop is striking: It marks the largest decline on both an absolute and a percentage basis on record going back to 1948. Moreover, the household survey has consistently showed bigger drops in government employment than the establishment survey has.
The unemployment rate would be far lower if it hadn’t been for those cuts: If there were as many people working in government as there were in December 2008, the unemployment rate in April would have been 7.1%, not 8.1%.
Ceteris is rarely paribus, of course: If there were more government jobs now, for example, it’s likely that not as many people would have left the labor force, and so the actual unemployment rate would be north of 7.1%.
More important, even after making an adjustment for the volatility of the household survey, the starkly different message that it is offering up on the scope of job government losses is curious.
In the three months ended April, it shows that there were an average 20.3 million people engaged in government work, 1.2 million fewer than the average for the three months ended December 2008. That is more than double the job losses registered by the establishment survey.
One explanation is that the household survey is picking up government job losses that the establishment survey hasn’t — it can, generally speaking, be better at picking up shifts in the makeup of the job market.
Another explanation is that the household survey might be picking up jobs lost by people who worked at private companies that were reliant on government spending. A school bus driver, say, who was polled by the Labor Department for the household survey might say that he works for the government when he actually works for a bus company that’s contracted by the local school district. If the school district curtails spending and he loses his job, that would be counted as a government job loss in the household survey, even though it really isn’t.
Though of course it would still be a job lost as a result of government-spending cuts.