AFL-CIO Chief Economist William Spriggs blogged about the state of the labor market this afternoon in anticipation of tomorrow morning’s release of June Jobs Numbers by the Bureau of Labor Statistics. William Spriggs, along with other AFL-CIO experts, will be available tomorrow morning for comment and can be followed on twitter @wspriggs
That blog can be read at http://www.aflcio.org/Blog/Economy/June-Jobs-Report-This-Silver-Lining-Has-a-Cloud and appears below.
Every indication is that the Bureau of Labor Statistics report for the June labor market will show very large positive gains in the private sector. We have already surpassed the previous highs of non-farm employment and private-sector employment set in 2008. But this silver lining has a cloud. We remain lagging in public-sector employment. Most importantly, local education employment still is below its level in June 2009. Though it fluctuates slightly month to month, it remains stuck near the same level as in 2012, about 320,000 below its peak. While other local government jobs appear to have recovered, local public education has not. State government employment also remains lower than its January 2009 high, wallowing about 140,000 below its peak level.
This is the first post-World War II expansion in which public-sector employment did not quickly recover. And it is the first expansion in which the public sector has been such a drag on the growth of Gross Domestic Product (the measure of all goods and services produced in the United States). This drop in public-sector spending and public-sector employment gives the appearance of the type of “structural” change so often discussed. Normally, structural change is used to proclaim a shift away from jobs with fewer skills and needing less education toward high-skill occupations needing high levels of education, resulting in workers being displaced and unemployed with too few skills for the new economy. But this is a structural change in reverse, since public-sector services tend to require a higher skill set and so lead to the hiring of workers with higher levels of education than the type of services, such as retail, business services, accommodations and food services, that have been growing during this recovery.
The low level of public-sector employment is reflected in the continued drag of state and local government on the GDP. Shrinkage in state and local government accounts for about 6% of the large 2.9% GDP drop in the first quarter of this year. In real terms, state and local government are back to their 2005 levels, and continue to fall from their pre-recession peaks. This is the headwind against which the expansion is sailing in the short term, but the decline in investment in public education is more like an anchor that is dragging on long-term economic growth prospects.
Since 2011, federal employment has continued to fall. This is also reflected in the drag the federal government has been on GDP growth. This first quarter of this year was the first since the third quarter of 2012 when contraction in government spending wasn’t a drag on economic growth. Again, this reflects declining public-sector investment necessary for long-term and sustainable growth.
As the Affordable Care Act continues to expand coverage to more people, state and local governments have growing needs to administer the program effectively. And as the global warming continues to cause wild swings in our weather patterns, local communities increasingly are pressed for first responders and adequate government response and management of disasters. So, more than being a drag on the recovery, the threat of public mismanagement grows as fewer workers are in place to address public needs.
The recent ruling by the Supreme Court in Harris v. Quinn may further complicate the matter of having an adequate public-sector workforce. Since the court ruled that these home care workers are not public employees, though their source of income is from a public program, they do not enjoy the status of public-sector workers in Illinois. That will continue to encourage the outsourcing of public functions, putting the public at arm’s length from the accountability needed with public dollars.
The other cloud is that since 2008, the less often discussed labor flow data consistently show that unemployed workers are more likely to drop out of the labor market the following month than to find employment, despite the recovery. This is helpful in understanding how the labor market looks from the perspective of those out seeking work. Over the past three months, this figure has improved for men—who have been more likely to find work than to drop out—but the pattern continues for women. The net result is that the unemployed are more likely to drop out than to find work. Women’s labor force participation, which peaked in the 1990s, is very sensitive to wages and job prospects, suggesting continued labor market weakness.
Contact: Jeff Hauser (202) 637-5018