ShareThe latest data showed 1.3 million net new job creation in the past 12 months. But there were some strong individual sector differences, particularly as related to private versus public jobs. A total of 1.8 million private sector jobs were created over the past 12 months. Jobs at the federal government fell slightly. The state and local jobs shed at a much faster pace under the strains of needing to balance the budgets at the state and local level. The combined state and local government job cuts totaled 340,000 in the past 12 months.
The recent sharp drops in state and local government jobs are quite unique, where the declines are generally rare to very modest, even during recessions (like the early 1990s and early 2000s) as the chart below shows.
Federal government jobs, however, have had large swings in the past two decades. During the 1990s, federal employment fell sharply. It then remained mostly flat, before federal job additions in the past 3 years – as part of the recent federal stimulus.
As for private sector jobs, the most robust gains were during the 1990s, with 22 million net new job additions during that decade. From 2000, there have been swings with the current job figures in 2011 being about the same as back in 2000.
Statistics courses will repeat the mantra that correlation does not mean causation. One cannot therefore say that sharp job cuts in the federal government led to the huge private sector job market boom in the 1990s. Nor can one say that recent years’ federal job additions led to a private sector job crash. It could easily be said the other way. That is, the strong private job gains during the 1990s permitted less need for federal government jobs and the huge private sector job cuts of recent years necessitated a need to add federal government jobs to soften the broader economic wreckage.
There are always so many influencing factors in macroeconomics that it is difficult to isolate the true underlying causes. Economists, therefore, debate endlessly on macroeconomic matters (though there are many consensus agreements on microeconomic matters). The unending economists’ debate then provides fodder for the politicians and the general public to debate – without being wrong or right. But one thing that could be agreed upon in light of the huge budget deficit is that federal employment jobs should be reduced once the economy is fully back on a strong growth track.