Where Government Employment Most Lags Behind National Recovery

Job totals have returned to pre-recession levels, but the public sector lags far behind. View data for every state.
by | July 8, 2014 AT 10:00 AM

After more than four years of slow and steady growth, the economy has finally returned to peak job levels dating back to the start of the recession. Payroll employment reached a new high in May, and Labor Department estimates released last week indicate the country added another 288,000 positions in June.

The public sector, however, continues to lag behind: State and local governments remain 425,000 jobs short of where they were when the recession began in late 2007.

While private employers slowly expanded payrolls over the past few years, growth in the public sector didn’t pick up until much more recently. Local governments, which added an estimated 22,000 positions last month, only began recording consistent job gains about a year ago. For state governments, employment still hasn’t rebounded, remaining relatively flat since early 2012.

Although the public sector has downsized, the extent of job losses varies significantly across states.

In about half of states, local governments have yet to recover all jobs lost since the official start of the recession in December 2007. The following chart shows states that haven’t reached pre-recession levels, ranked by percentage decline:

It’s no surprise that localities in states with hard-hit economies needed to trim payrolls. Rhode Island and Nevada, for example, also have the nation’s two highest unemployment rates.

By contrast, Texas and Missouri both have seen local government payrolls expand by more than 20,000. Most states that have added jobs, though, only registered increases of no more than a few percentage points over the six-and-a-half-year period. (See full table below).

To a large degree, public employment is tied to how well the private sector grows and provides for tax revenue. Local governments also rely on states and the federal government to fund their budgets. So, in a slowdown of the economy, there’s a time lag that occurs before localities take a hit.

It’s for this reason that cuts to local government payrolls didn’t begin to accelerate (at least nationally) until 2010. Many localities continued to add jobs after other sectors of the economy trimmed payrolls, so the chart above understates some of these job losses.

To show the extent to which the sector has shrunk, here are peak local government employment levels for each state. These figures represent the highest monthly total employment recorded from the official start of the recession up through 2012.

Here’s a chart showing how peak local government employment totals compare with states’ most recent estimates for May:

By this measure, all but eight states (not shown) haven't recovered lost local government jobs.

Fluctuations to school budgets drive much of the totals since education jobs account for about half of employment at the local level.

Along the same lines, most states have yet to reach peak employment levels for the private sector. Even states where the jobs market has fully recovered need to expand further to account for population growth.

So, while employment has surpassed pre-recession totals, economists suggest the national economy must still add several million more jobs before unemployment drops to normal levels.

Local and State Government Employment Data

NOTE: Figures compare job totals using preliminary estimates for May. The start of the recession refers to December 2007; peak employment refers to the highest monthly total from December 2007 through 2012.

Source: Governing calculations of Bureau of Labor Statistics seasonally-adjusted data