Signs Of The Apocalypse: Federal Government Hiring Drives Jobs Growth

The major concern about the March employment numbers is that the economy added 162,000 jobs, but of those, 48,000 were temporary workers who have been hired for the 2010 Census. Economists pointed out that this Census employee trend does very little for long-term job creation. It will take years to replace the eight million jobs lost during the recession. The government will have to do a lot of hiring.

And, the government is doing just that.

Gallup’s Job Creation Index for April shows that the federal government was the primary engine for new hiring during the month. The private sector made a very modest contribution, and state and local governments continue to aggressively lay people off as their taxes bases go through rapid contractions. This process at the local level is not over. Property taxes are a great part of the money brought in by cities and municipalities. Real estate prices are still down over 30% from their peaks three-years ago. Whatever money comes from local income taxes has been eroded by high unemployment.

Gallup reports that

“The overall Index value for American workers in April tilts positive, with 27% of workers saying their places of employment are hiring, and 22% saying their employers are letting people go — resulting in an overall +5 Job Creation Index.”

The most noteworthy data may be the extent to which businesses are still firing people. There is a popular assumption that lay-offs are largely lower and that employers, while not hiring, are in a steady state of worker retention. Productivity has gone up so much in the last two quarters that the amount of work that any one person can do has probably reached a point past which is cannot reasonably go. The fact that over one out of five enterprises, private and public, are still letting workers go is a sign the aftershocks of the recession are still powerful.

The federal government is trying to make up for the deficit in the private and local sectors. Some portion of the $787 billion stimulus package went to programs that are strictly federal. Washington has turned that into a hiring binge.

:By almost a 2-to-1 margin, federal employees say their employer is hiring rather than firing, giving the federal government a relatively robust +18 Job Creation Index for April.”

Federal job creation, some of it due to the Census, is by its nature temporary. The Administration is pushing for sharp deficit reductions as a way to get out in front of what is universally considered the dangerous problem of rising national indebtedness. Discretionary federal spending will have to be a major target lowering deficit spending. The government has, in essence, committed itself to being a smaller employer.

Employment will have to grow quickly in the federal and private parts of the economy to help offset the plunge in local and state government jobs. Gallup’s data shows that hiring has gone up 14% according to respondents who work for state governments, while 42% say their employers are reducing workforce size. The local numbers are not much better with the ratio of 16% to 42%

The Gallup data is a sign that the belief the number of unemployed or underemployed people in the US will drop by any meaningful extent is wrong. The government’s stimulus packages have helped create jobs at the federal level. Stimulus dollars have had very little effect on the private sector at all, and aid to the states is not being used for hiring.

Unemployment rates in the US are, whatever small hope monthly data may give, frozen near the top of a range that peaks at 10%.

Douglas A. McIntyre