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March 28, 2013

'The Same-Old, Same-Old Labor Market'

David Altig (there is much more detail, graphs, etc. in the original post):
The Same-Old, Same-Old Labor Market, macroblog: In his March 24 Wall Street Journal piece on declining government payrolls, Sudeep Reddy offers up a key observation:
The cuts in the public-sector workforce—at the federal, state and local levels—marked the deepest retrenchment in government employment of civilians since just after World War II... down by about 740,000 jobs since the recession ended in June 2009. At the same time, the private sector has added more than 5.2 million jobs over the course of the recovery.
As the Journal article notes, the story of shrinking government employment combining with private-sector payroll expansion has been remarkably consistent for much of the recovery. ...
It is worth pointing out that the monthly average of 17,000 state, local, and federal government jobs lost since March 2010 has been nearly matched by average monthly increases of better than 14,000 jobs in manufacturing, a sector that persistently shed jobs in the previous recovery. The replacement of private- for public-sector employment has generated 175,000 to 185,000 net jobs per month in both 2011 and 2012. To put one perspective on that figure, at current labor force participation rates (along with some other assumptions and caveats), that pace would be sufficient to reach the Federal Open Market Committee's 6.5 percent unemployment threshold by sometime in spring 2015 (as you can verify yourself with the Atlanta Fed's Jobs Calculator). That calculation raises the stake somewhat on the matter of how "the rest of the private sector responds."
Think how much better things would be without shrinking government employment, or even better with a temporary expansion in government employment to bridge the gap until private sector employment prospects improve.

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