The Recession's Fat Cats: Public Employees

Last week, the Huffington Post (here) was all over this new study showing that low-income workers got hit more severely during the recession than high-income workers (low-income workers suffer an over 30 percent unemployment rate, workers making about $138,000, only a 3.2 percent.)

The data in this study, which turned out to be quite misleading, certainly makes for nice populist headlines. But it is hiding the true debate that we should be having. And that’s not that low-skill workers are vulnerable to recession (duh) but that public-sector employees still have jobs and private employees don’t.

Look at the data:

In this chart, I compare seasonally adjusted unemployment rates across segments of the economy, dividing these segments using the super-categories designated by the Bureau of Labor Statistics. The chart compares the unemployment rates in January of 2009 (blue) with the unemployment rates in these same sectors a year later (yellow). (FYI, the difference would be even more dramatic if I had used not seasonally adjusted data)

In both years, the unemployment rate within the government has been small relative to the level of unemployment within the entire economy, and particularly so relative to the private sector. In the course of a year, government employment has decreased by 296,000 jobs to 4.3% unemployment; during the same period, employment in the private, non-agricultural, sector has decreased by 2.3 million jobs to 11.1%. (And if you look at not seasonally adjusted unemployment data, the lose of private jobs reached 3.1 million and the lose of public jobs is roughly 70,000. That’s quite a gap.)

From January 2009 to January 2010, plummeting employment has been concentrated in the private sector. During the time period examined, employment in the private sector decreased by 3.5% while employment within government decreased by 0.5%. Furthermore, employment has consistently decreased more quickly in the private sector than within the government (in addition to decreasing more on net). Since January 2009, employment has decreased in the private sector at an average rate of 0.3% each month; this is 6 times faster than employment has decreased in government.

Not only has unemployment been concentrated in the private sector within the past year, it has been concentrated disproportionately so. When measured as a percentage of GDP, government accounted for roughly a quarter of GDP. Conversely, unemployment in the government sector accounted for 5.9% of the increase in the economy’s total unemployment which has occurred in the past year. In contrast, job losses in the non-agricultural private sector have accounted for 81.3% of the total increase in unemployment.

By the way, public-sector employees are also the ones benefiting from the stimulus funding, not the private-sector employees. The job-creation data reveals that most of the jobs were “created or saved” in the public sector. Based on data from Recovery.gov, we find that of the 640,000 jobs the administration claims to have created with stimulus funds, only some 140,765 of them were private jobs.

Now, I would love to see a post by Ariana Huffington titled “No Labor Market Recession For America’s government employees, Private Workers Hit Hardest.”

Also, I would love to see the Tea Party Movement get jazzed up about this and expose the stimulus bill for what it is: A job creating machine for the public sector.