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New York Post


First the Stimulus, Now the Hangover

October 12, 2010

By Nicole Gelinas

Last week’s dismal jobs figures tell us exactly what the President Obama’s stimulus did: It temporarily saved jobs in state and local government -- thereby slowing our recovery.

Friday’s job scorecard for September -- the last before Election Day -- didn’t carry even a hint of an imminent boom. Unemployment stayed at 9.6 percent, with private companies adding 64,000 jobs.

And 64,000 jobs is nothing. The economy must create nearly five times that to keep up with population growth and replace 7.6 million jobs lost since 2007.

Worse, the new hires were down a third from August -- and the positions were low-paying, in bars, restaurants and retail.

The report also told us that people who have jobs aren’t working much overtime. That means companies aren’t overwhelmed by unexpected business -- and won’t need to do a lot of extra hiring for the holidays.

The big headlines went to the drop in government jobs. Local and state government lost 83,000 jobs -- the biggest hit in modern history. Teachers lost the most, with school districts cutting nearly 58,000 after summer break.

That’s terrible for laid-off workers. Life would be better if nobody had to lose a job. And, of course, Washington should provide unemployment benefits, as it does. But government still has to adjust to a new reality, just like every other part of the economy.

This adjustment has just begun. Even with the latest losses, state governments around the nation still employ 8 percent more people than they did a decade ago (at the peak of the last financial bubble). At the local level, the figure is 9 percent. That’s nearly 1.6 million people added to public payrolls in the last decade.

Yes, the US population also grew at about 9 percent over the same period. But the population doesn’t pay the taxes that fund public-sector employment. People with private-sector jobs do.

And private companies created few new jobs after 2000 -- and then managed to lose them all, and more: Private job growth is minus 2 percent over the last decade -- there’s 2.2 million fewer private workers to pay for those 1.6 million new public-sector workers.

In short, when it comes to private job growth, the last decade has been a lost decade.

A big part of the reason: State and local governments never got around to adjusting to the last recession. After the tech bubble burst, the private sector shed 3.5 percent of its jobs over two years, or nearly 3 million. But the public sector kept on hiring through the early-2000s slump.

Politicians added 5 percent (647,000 people) to local payrolls and 3 percent (167,000 people) to state ones. Most of these new workers -- nearly half a million -- were, yes, teachers and education administrators.

Back then, because local and state pols chose to spare their workforces the pain, they had to inflict it somewhere else.

So states like New York and California spent the early 2000s raising taxes, slashing infrastructure investments and taking on debt.

That should have left them with no choice but to start firing public workers two years ago, when the bottom fell out of their tax revenues. (After all, the construction industry depends on the same source of revenue -- property values -- as do local governments, and residential-construction jobs are down 31 percent since 2000.)

Instead, the 2009 stimulus law sent more than $220 billion to state and local governments -- without asking them to pare their workforces or workers’ benefits.

But now the stimulus cash is running out. So the state and local government jobs that it “saved” are starting to disappear, as governments around the nation do what their voters have been doing for three years now -- cutting back.

So as President Obama stumps for Democrats, reminding voters that the GOP tried to thwart $26 billion in new stimulus to states this past summer, voters should remember that some harsh public-sector labor austerity now will be good for the economy later -- as it will minimize state and local tax hikes and allow for long-term investment.

We can’t afford another lost decade -- and neither can the freshly laid-off public workers, who must now find jobs in a growing private sector.

Original Source:



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