Local Government Employment Declines for 12th Month

Friday's jobs report marks a year of declining local government employment. Some, though, think the end of cuts is near.
by | September 7, 2012

While most sectors of the economy showed signs of recovery this year, local government employment continues to drop at a steady pace.

Localities shed an estimated 4,000 jobs from payrolls in August, according to Labor Department data. Friday’s monthly jobs report marks the twelfth consecutive month of declining employment, with a total loss of 88,000 positions since August 2011.

Over the year, furloughs and cuts to benefits often accompanied layoffs as many cities and school districts adjusted to fewer federal funds and lower property tax revenues, which plummeted after the housing bubble burst.

“In general, the big drag on overall employment has really come from the government sector,” said Michael Brown, a Wells Fargo economist. “It’s kind of in a class of its own.”

Brown said governments are taking steps to align their expenditures to reflect slower revenue growth.

In Jacksonville, Fla., about 150 city workers were laid off and another 150 demoted this week to bridge the city’s budget shortfall. Public works and library system employees bore the brunt of the reductions, the Florida Times-Union reported.

Other cities issuing layoff notices or announcing cuts in recent weeks include Colorado Springs, Colo., Schenectady, N.Y., and Hartford, Conn.

Through staff reductions and other cuts, many “right-sized” their payrolls, which Brown said could remain stable for a while.

“Going forward, we're not going to see a tremendous number of job losses, but I don’t think we’re in a position to have a large number of job gains either,” he said.

While cuts at the local level haven’t stopped yet this year, they pale in comparison to job losses from 2011.

Because the bulk of school districts' funding comes from property tax revenues, teacher layoffs and trimming of school budgets have accounted for the majority of shrinking public payrolls.

This concerns Brown, who points out that many unemployed workers lack skills to compete in the current labor market. Pulling teachers out of classrooms won’t help bridge this gap.

“The effect may be five, 10 or 15 years down the road, but I think that sets us up for problems later on,” he said.

A few agencies took drastic measures to realign staff. Officials in Camden, N.J., plan to replace the city’s existing police department with a new regional police force. The move is estimated to save $14 million annually.

In some cases, agencies hired seasonal employees as needed. This includes part-time employees for snow removal, tax collection and similar functions. Recent census survey estimates showed part time-government employment increased slightly last year while the number of full-time workers dropped.

Jacqueline Byers, research and outreach director for the National Association of Counties, said many agencies were expanding staff before the recession hit, but they’re now adjusting for sluggish economic growth and property tax revenues tied to lower home prices.

“If we’ve learned anything from this recession, it’s that you don’t build up like governments did during the boom,” she said.

State governments also made cuts this year, but at a slower rate than localities. Total employment for state agencies, including colleges and universities, has declined by about 35,000 since last August, according to data.

Meanwhile, nearly all segments of the private sector added jobs this year, albeit at a slower-than-expected pace. The private sector added 103,000 jobs last month, with an average monthly increase of 165,000 over the year.

Byers said more confidence in the economy, coupled with baby boomers exiting the workforce, should soon translate into fewer layoffs.

“The reality is I don’t think you’ll see too many more layoffs,” she said. “We’ve just about leveled off.”

A Gallup poll, which is based on a telephone survey of public and private workers, released earlier this week reported state and local governments added more jobs than they lost last month for the first time since the start of the recession.

Government payrolls reflect the recovery of local economies, which has been uneven.

Byers said regions of the country with the hardest-hit economies will be last to rehire workers, and we shouldn't expect a hiring spree. “We’re never going to get back to the level where we were,” she said.

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