Government Job Cuts Prolonging Recession

A correlation is the statistical relationship between two pieces or sets of data. In the case of government job cuts and economic stagnation it is hard to ignore: a new Brookings Institution study demonstrates that the cities having the hardest time recovering from the financial crisis and recession are those that have cut government jobs. They range from Portland, OR on the west coast to Providence, RI in the east; from Grand Rapids, MI in the north to Palm Bay, FL in the south. Some are big and some are small.

The point is that if ideology is permitted to trump actual data, policy failure inevitably follows. It rarely happens in business, but if it does rhetoric is challenged and the primacy of fact-based decision-making is reasserted. Same should be true in government. JL

Tami Lubhy reports in CNNMoney:

"Metro economies struggling the most to recover from the Great Recession typically lost government jobs, a new Brookings Institution report found.

Fourteen of the 20 metro areas that have performed the worst since the start of the nation's economic troubles lost government jobs, according to the report, published Wednesday.

They include: Bridgeport, Conn.; Cleveland; Detroit; Grand Rapids, Mich.; Las Vegas; Minneapolis; New Orleans; North Port, Fla.; Palm Bay, Fla.; Phoenix; Riverside, Calif.; Sacramento, Calif., and Toledo, Ohio; Allentown, Pa.; Buffalo, N.Y.; Chicago; Dayton, Ohio; Greensboro, N.C.; Harrisburg, Pa.; Pittsburgh; Portland, Ore.; Providence. R.I., and Scranton, Pa.

State, local layoffs to hit record levels
Many of these struggling metro areas have other problems, such as falling home prices and rising unemployment overall. But the loss of government jobs has only added to their woes.

Conversely, many metro areas that have done well in recent years have experienced growth in government jobs, the report found. The study is the latest in a series of warnings from experts who say that cutting deeply into public payrolls can hinder the economic revival.

"This is not the time to be shrinking the size of government," said Howard Wial, a Brookings fellow and co-author of the report. "We're in a very precarious recovery. If we shrink the size of government right now, we'll only make that recovery more precarious."

2 million government jobs at stake
State and local officials, not to mention members of Congress, have been tripping over themselves to reduce government payrolls. State and local payrolls have shrunk by an average of 23,000 jobs a month over the past three months, while federal payrolls have stayed essentially flat. Meanwhile, the private sector has created an average of 180,000 a month during the same period.

The worst is yet to come. State and local governments are forecast to shed up to 110,000 jobs in the third quarter, according to IHS Global Insight. That would be the first time above 100,000 job cuts in just one quarter