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"