Wednesday, January 27, 2010

Jobs and Jobless Rates: Private vs. Government

The graph above displays monthly employment levels for the private sector (blue line, left scale, data here) and the government sector (red line, right scale, data here) from January 2000 through December 2009, and shows a pretty bleak job picture for America’s private sector. Since private sector employment peaked at almost 116 million jobs in December 2007 at the onset of the recession, more than seven million private sector jobs have disappeared, while during the same time period government jobs increased by almost 100,000. That is, the entire burden of job losses during the recession has fallen on the private sector, while the public sector has actually expanded and added jobs during the economic downturn.

The disproportionate adverse effect of the recession on the private sector can also be seen in differences in jobless rates between the private and public sectors (see chart below). During the Great Recession, the jobless rate for government workers reached 3.6% in December 2009, or only about one percent above its historical average of 2.55%, compared to the increase in the jobless rate for private sector workers to 10.2% in December, or almost 4.5 percentage points above its historical average of 5.75%.


What about the $862 billion stimulus package that Obama claimed recently had already “created or saved 640,000 jobs," and would eventually save or create 3.5 million jobs in total? The employment data show that the $862 billion stimulus has yet to create a single new job in the private sector - there hasn’t been a monthly gain in private sector employment for the last 24 months.

To the extent that the stimulus has created or saved any jobs, they’ve been in the public sector, and have likely come at the expense of crowding out the growth that might otherwise have taken place in the private sector. After all, the only way the government can stimulate one person with a job or income is to first “unstimulate” somebody else with higher taxes, with no net gain in jobs or income. (Or as Nick Gillespie and Matt Welch remind us about the stimulus: "It can’t work, because government can only spend money by taking it from the current or future economy.")

In tonight's State of the Union address, look for President Obama to make more promises to create jobs for Americans. The fact that $862 billion in stimulus money hasn’t yet created a single private sector job and has added fewer than 100,000 public sector jobs should make us very skeptical about the government’s ability to create jobs. Despite all of the political rhetoric about “saving or creating” millions of jobs, the labor market statistics suggest a much different, and much more depressing story, especially about private sector jobs.


Update: Jeff Jacoby's column "Income Angst? Not for Public Employees"

15 Comments:

At 1/27/2010 12:49 PM, Anonymous gettingrational said...

Federal Government and many state governments are very well paid -- with great benefits, lots of holidays and low risk of demotion or firing for poor performance.

Why risk market job performance criteria in the private sector when the public sector is almost riskless?

 
At 1/27/2010 12:52 PM, Blogger Colin said...

http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2010/01/27/income_angst_not_for_public_employees/

 
At 1/27/2010 12:57 PM, Anonymous gettingrational said...

Colin, great Boston Globe Article. Thank you.

 
At 1/27/2010 1:09 PM, Anonymous EscapedWestOfTheBigMuddy said...

So, I am sitting here trying to parse what is meant by the difference between private sector and government unemployment.

Is this division made on what job you last had, on what job your looking for, or something else entirely?

 
At 1/27/2010 1:17 PM, Anonymous Anonymous said...

Jobless rates? I thought that the greatest Keynesian stimulus in the history of the world was going to end joblessness, or at least stabilize it. What gives?

 
At 1/27/2010 1:39 PM, Blogger juandos said...

Will the Obama Messiah take the advice of Reason's Matt Welch & Nick Gillespie?

 
At 1/27/2010 2:19 PM, Blogger Chris said...

Great post. John told me to come here. He posted it on my blog.

 
At 1/27/2010 2:45 PM, Blogger bob wright said...

Mark,
Slight correction in your last paragraph?

You say "The fact that $862 billion in stimulus money hasn’t yet created a single private sector job and has added fewer than 100,000 private sector jobs ...."

do you mean "100,000 public sector jobs" ?

 
At 1/27/2010 3:10 PM, Anonymous Anonymous said...

Why don't those bank executives who took in astronomical bonuses last year take some of that money and hire some employees instead? I have no problem with people being rich, but come on, what good does it do for society if these cohorts hog all of these financial resources for themselves - that's like a wealthy noble who starves his peasants by taking far more food than he needs or deserves. I think hiring people would do more to stimulate the economy more than anything - especially when these bank morons made a mess of things, and the government had to fork over a huge bailout to prop up the industry.

Of course nothing is going to change with Obama going *wink* *wink*

 
At 1/27/2010 3:12 PM, Anonymous Anonymous said...

"Jobless rates? I thought that the greatest Keynesian stimulus in the history of the world was going to end joblessness, or at least stabilize it. What gives?"

Apparently it worked in China, where their stimulus took up a far larger chunk of their GDP then ours - they have double-digit growth. I suppose we can't afford a proper stimulus, though.

 
At 1/27/2010 3:45 PM, Blogger stevedp86 said...

Anon-
We're a more mature economy. It's like comparing why Facebook is growing at a faster rate than Microsoft.

 
At 1/27/2010 4:52 PM, Anonymous Lyle said...

I think we need to give mediocre bankers a chance, as the best and brightest bankers managed to screw it up so much. A mediocre banker should come a lot cheaper, since they all say that they have to pay so much to keep the best people. If the best people screwed it up so royally, let them go and bring on the mediocre folks.

 
At 1/27/2010 5:20 PM, Anonymous Anonymous said...

Why don't those bank executives who took in astronomical bonuses last year take some of that money and hire some employees instead?

It seem that Obama has plans for those profits:

Obama Seeks to Raise Money From Industry He Has Criticized, Bloomberg

Gee, first you threaten with regulation and then you ask for campaign contributions. What does the mob call this, again? Oh, that's right, extortion.

... especially when these bank morons made a mess of things ...

Please, try to keep up. It was your heroes in the Democrat party that "made a mess of things". I know, I know, James Carville says that the plan is to blame everyone else - especially Bush - and following Lenin's dictum, that a lie repeated often enough becomes the truth, that you're are only doing your small part. The trouble is that we've actually examined the evidence and aren't buying it.

The Trillion Dollar Bank Shakedown

Andrew Cuomo and Fannie and Freddie

Barney Frank, Predatory Lender

 
At 1/28/2010 2:17 AM, Anonymous buy r4 card said...

It’s your right as a citizen to be concerned how and on what your money is spent. It doesn’t belong to the government, it belongs to you, and the government belongs to you too. The people who work in government are there at your mercy, because you have the power to vote people into office who can terminate their jobs.

 
At 1/28/2010 11:46 AM, Anonymous DrTorch said...

Any qualifications for government contractors?

They're usually considered part of the private sector, yet their funding comes directly from the Fed Gov't. And they get paid well.

Include that and I'll bet you the numbers are FAR worse.

 

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