Impact of government job losses on rest of economy
By Mark Lacter | January 4, 2013 8:57 AM



Nearly 700,000 U.S. public-sector jobs have been lost since the end of 2008, by far the largest four-year decline in government employment since the mid 1940s, according to NYT columnist Floyd Norris - and this time around the blame can't be pinned on the end of World War II. You don't hear much about the impact of these lost jobs because elected officials don't want to make it appear as if they're incapable of handling fiscal problems (even if it's true). The L.A. City Council has been making a big deal about saving a few positions in the current budget cycle, but there's practically no mention of how to handle several thousand jobs that have been eliminated since the recession. The city's workforce keeps shrinking and yet the reductions have been so scatter-shot that certain departments face far more cutbacks than others. Of course, personnel rejiggering doesn't exactly make for great sound bites, so the problem tends to be ignored - well, until somebody tries to get a copy of a 1975 building inspection and discovers that there's only one clerk to make the copies instead of four. But even putting such lapses aside, the disappearance of so many government jobs is bound to have an impact on the general economy, which presumably might be of more interest to the politicians. From the Economic Policy Institute:

Public-sector job cuts also cause job loss in the private sector, for a couple of reasons. First, public-sector workers need to use inputs into their work that are sourced by the private sector. Firefighters need trucks and hoses, police officers need cars and radios, and teachers need books and desks. When public-sector jobs are lost, it stands to reason that the inputs into these jobs will fall as well, and indeed research shows that for every public-sector job lost, roughly 0.43 supplier jobs are lost. Second, the economic "multiplier" of state and local spending (not including transfer payments) is large - around 1.24.4This means that for every dollar cut in salary and supplies of public-sector workers, another $0.24 is lost in purchasing power throughout the rest of the economy. Teachers and firefighters stop going to restaurants and buying cars if they're laid off, which reduces demand for waitstaff and autoworkers and so on. Add these two influences together (supplier jobs and jobs supported by this multiplier impact) and roughly 0.67 private sector jobs are lost for every public sector job cut. This means that the public sector being down 1.1 million jobs has likely cost the private sector 751,000 jobs.