Chart of the Day – Government to Workers: You’re Fired!

One of the more interesting things during the recent recovery is that it has occurred almost entirely without aid from government employment.   The USA lost 8.6 million jobs during the financial crisis (from peak to trough) and has recovered about 6.7 million of those jobs.  The private sector has recovered 7.4 million of those jobs all on its own.  But what’s interesting is that the government has actually shed 700,000 jobs since the 2008 peak.

Now, the reason this is unusual is because this almost never happens during a recovery.  For instance, if we look at recoveries in the last 30 years you see a distinct trend in government employment.  One of the largest automatic stabilizers in the economy is the government workforce.  When private jobs decline and recession occurs the government tends to just plug along.  But not this time around.  The government has been a big detractor from employment growth during this recovery.

Of course, the government has also run consistent trillion dollar deficits during this recovery so it’s not like this has been austerity, but for all the people discussing how bad the job market is, well, here’s one of your primary reasons relative to past recoveries.  If the government had done what it normally does and employed more people during the recovery then the unemployment rate would be a lot lower, we’d be above our all-time highs in non-farm payrolls and there’d be a lot less talk about Food Stamps and how miserable the recovery has been.

jobs

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Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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  • Frederick

    Great chart. What’s so funny about all the ranting I read about food stamps is that there’d be a lot less people on food stamps if they were employed. But instead of paying these people to do something we fire them and then they sign up for government aid where they can do nothing. How stupid is that?

  • Hans

    I simply do not understand the theme of this thread….I suspect governmental positions reached their zenith just before 2008 and collapsed due to the govcession…

    Since parochial agencies spent so much on their “human resource” over the past three decades they could no longer balance their budget – resulting in the shocking cashiering of staff…

    Can we say that the 2008 economic debacle, was a blessing when it comes to the governmental staffing…

    But then, please remember, nearly one of five workers is a government position so the lost of 700k positions is, for all practical proposes meaningless…

  • John B.

    Interesting chart, but what is the message?
    Are we happy or not?
    Capitalism from my point of view means constant crisis. Government employment is just a way how to lower its social impact. If it is now impossible to do so, what will come next with another crisis? Should we fear it? We are living in a truly predatory society, where debt and ability to pay it are the main factors of social relations. Debtor is bad, public employer is bad, because he does not generate profit, he generates national debt.

    When people lose their ability to pay for their household debt (like in Canada) the whole process becomes at least disturbing.

  • Tim

    Where you see constant crisis, I see constant opportunity. One can lived paralyzed by fear of the inevitable next crisis or one can prepare for and, dare I say, take advantage of or prosper from crisis. I try not to fear it, but accept it and make myself as robust and adaptable as possible. That’s easier said than done, of course.

  • Tim

    Intriguing chart. One question and three things to note.

    Q. Is this all levels of government or just federal?

    1. As time goes on, the percent of government job gains/losses has decreased. 1982 was higher than 1991, which was higher than 2001, which was higher than 2009.

    2. In absolute value terms, it looks like the government moves are generally dropping, too. 1982 was further from 100 than 1991, which was further from 100 than 2001, which appears to be about as far from 100 as 2009, albeit in the opposite direction.

    3. The recent curve is flattening out, though it still has a slight downtrend.

  • http://dismalecon.blogspot.ca DismalEconomist

    Pretty sure this is all levels of government. States and Municipalities have been the ones paring back their workforce most aggressively. It would be interesting to see the three levels of government employment indexed to 100 and see how those jobs losses have been spread around.

  • john

    This data is terrible and is an other example of fitting data behinds ones headlines. We lost 8.6 million well paying jobs and replaced them 7.4 low paying part time jobs.

  • But What Do I Know?

    Good chart. Two reasons for the difference, IMHO. First, a very large proportion of “government” workers are teachers, and the school-age population has been declining. Second, state and local governments have had to ramp up their pension contributions because of losses in 2008 and low interest rates since then–with an added demographic component of increasing retiree payments. The money going into pension contributions equates to low/no hiring. I’m not trying to make a case against municipal pensions–just stating facts.

  • MarketWatcher

    It would be interesting, on the chart, to also show the amount of cumulative government debt that has been added during the recovery of each of the recessions shown. That would likely explain why (during the 2009 recovery) that government has been unable to add a similar volume of jobs as in previous recoveries. Taxpayers money must first go to pay principal and interest. It would be interesting to compare the slice of the government spending pie that has gone to pay P&I during each recession. Maybe Cullen Roche could take his research a step further and not only point out “What” happened but also “Why”.

  • tradeking13

    Maybe the machines are taking their jobs :)

  • jaymaster

    I think you’re actually correct. A large portion of government jobs are clerical/administrative in nature. And those are the types of jobs that were automated out of private industry over the last decade or so. IMO, this is finally trickling its way through the governments.

  • John B.

    The problem is that I´m influenced by David Graeber´s Debt: First 5000 Years more than by the classical economy. I do not see myself as a unit constantly seeking new opportunities, I rather see myself as a human being who wants to enjoy all the merits of modernization without being overrun by the disadvantages of the economical models we are using now.

  • http://pragcap Michael Schofield

    Not only has US net worth been restored it has actualy increased, but the mechanisms used only transmitted money to the top. A consumer-based economy can’t function without the economic health of two thirds of its consumers. One percent of national net worth would double net worth of the bottom fifty percent. We really aren’t talking about a lot of money and government jobs could play a big role.

  • SS

    The thing that most jumped out to me on this chart was the duration of the last few recoveries. Are we really only half as long as the last 3 recoveries? If this is similar to the 82 or 92 recovery then this could be only the 5th inning.

  • Johnny Evers

    Many municipal and state governments are actually paying more to employees, except the employees are now retired.
    Pension and health care costs are getting so high that government is letting go of current workers, both to save money now and to take them off the books later.

  • Errorr

    The federal workforce has been in decline since the late 60s although most of that decline is the reduction in military personnel. The non military workforce declined from 1990 to 2005 and has increased since then although almost all of this is civilian DoD and Homeland Security hiring with smaller increases in justice and veterans. Nominal Fed employment has seen a recent boost in DoD and HHS SSA because of the coming boomer retirement surge and to a lesser extent Obamacare.

    Ultimately the employment drop is almost entirely state and local dominated by teachers.

  • Mike

    If the US has recovered 6.7 million jobs total how has the private sector recovered 7.4 million jobs?

  • http://highgreely.com John Daschbach

    Because government employment has dropped!

  • http://highgreely.com John Daschbach

    As the chart shows it’s about a 3.2% drop, not meaningless. Government employment at all levels is about 1/6th of total employment and the change in government employment is about 0.5% of total employment. So all other things being equal it’s not a big drop, but it is significant when the nature of government jobs and the multiplier effect is considered. If government employment had increased as it should have then the direct contribution would be at least 1% in unemployment and with the indirect contribution probably close to 3% in unemployment levels.

  • Johnny Evers

    In today’s paper we read that the city of Detroit has twice as many pensioners than it does actual employees.
    Technically, the pensioners are ‘employed’ by the city.