In this posting, I'm going to look at one of the key reasons why the current recovery is different for unemployed Americans. As you will see, looking back three recessions, one aspect of the economy has prevented the jobs picture from improving as quickly as it might.
Let's open with this graph showing the number of government jobs in the United States since the beginning of the Great Recession in December 2007:
At the beginning of the recession, there were 22.376 million government workers in the United States. This rose to a peak of 22.992 million in May 2010 and fell back to a post-recession low of 21.826 million, rising ever slightly to its current level of 21.857 million. That means that since the Great Recession took hold, the economy has seen 519,000 government jobs vanish or 2.32 percent of the pre-recession total.
Now, let's look back at the second last recession that stretched from March 2001 to November 2001. I'll look at government employment data for a 53 month period beyond the end of that recession to match the time period in the first part of this posting:
You'll notice right away that this graph is almost a perfect inversion of the first graph. At the beginning of the 2001 recession, there were 20.945 million government workers in the United States. This rose to 21.326 million by the end of the recession and kept rising throughout most of the remaining 53 months, hitting 21.754 million in April 2005. That's an overall increase of 809,000 jobs or 3.86 percent of the total pre-recession government workforce.
Lastly, let's look back total government employment during and after the twin recessions of 1980 and 1981 – 1982:
At the beginning of the 1980 recession, there were 16.201 million government workers in the United States. This fell to a low of 15.89 million during the middle of the 1981 – 1982 portion of the recession but then rose fairly rapidly, hitting 16.765 million in April 1986. That's an overall increase of 564,000 jobs or 3.48 percent of the total pre-recession government workforce.
Basically, while not a terribly scientific sampling, during the second- and third-last recessions, 4 years and five months after the end of a recession, government employment rose by around 3.6 percent from its pre-recession level. In the case of the Great Recession, a 3.6 percent increase would have meant that 805,500 government jobs should have been added by this point in the recovery, however, as I noted above, we have seen losses of 519,000 government jobs. If we add the two together, that's a total loss of 1.325 million potential and actual government jobs.
With November's BLS data showing that there were 10.9 million unemployed Americans, the addition of 1.325 million government jobs would certainly go a long way to actually reducing the unemployment rate, rather than relying on an ever-decreasing labor force participation rate to do the heavy lifting. Unfortunately, this is one of the prices that we all pay for mounting and nearly unserviceable government debt levels. While there is no doubt that governments do have to cut spending, now we can see quite clearly that there are consequences for the flagrant overspending that has taken place over the past decade.
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