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Big Public-Sector Job Losses Dragging Down Economy

As our analysis of today’s jobs report explains, a sharp decline in government jobs in September more than offset the small gain in private-sector jobs. State and local governments, still coping with a massive recession-induced loss of tax revenue and their own balanced-budget requirements, eliminated 83,000 jobs in September, and most of the lost jobs — some 50,000 of them — were in education. Since August 2008, states and localities have shed 416,000 jobs (see chart). These numbers suggest three things:

  • States badly needed the extra education assistance that Congress approved in August. Today’s Washington Post editorial argues, on the basis of a few local examples, that states didn’t really need the $10 billion in education funding. But today’s national figures on the large and continuing loss of education jobs show otherwise.
  • Even with that help, state budgets are extremely tight and will remain so next year. States addressed $125 billion in budget shortfalls for the current fiscal year and face as much as $140 billion on shortfalls next year, our new analysis of state budget conditions shows. While federal help (both the 2009 Recovery Act and the August legislation, which included money for health care as well as education) has closed part of state shortfalls over the past few years, states are also imposing significant layoffs, cuts in services, and tax increases to balance their budgets.Moreover, the federal help is running out. About $60 billion is helping states in the current fiscal year, but only $6 billion will remain next year.
  • Large losses of public-sector jobs weaken the economic recovery. When teachers are laid off, for example, it’s bad news not only for them and for their students, but for the wider economy. Laid-off workers cut back their spending, which means local businesses are less likely to hire new workers or increase orders from their suppliers.