No, The Private Sector Is Not Doing Fine

We all know that Obama revealed his true agenda last Friday when he stated that “The Private sector is doing fine” and he urged us to focus on more Public sector hiring.  I wrote a previous post debunking that theory but there have been further Leftist blog postings supporting the President’s position. 

Ezra Klein wrote an article supporting the President’s call for more Public sector hiring and he even provided a graph showing how Public sector hiring in the latest recession has lagged behind the previous 3 recessions. 

I sent a tweet out wondering why Mr. Klein’s graph was so different from the Heritage Blog graph which is shown below.

To his credit, he replied to me and I was much appreciative of that!

He is right that the Heritage graph broke up the Federal, State and Local government employment deltas and there are many more in the State and Local levels than the Federal so the overall employment deltas (which Mr. Klein reported) is weighted in favor of the State and Local numbers.  Mr. Klein even wrote a subsequent blog post where he referenced my tweet question and explained it in more detail.

The answer is that the federal government, state governments, and local governments do not employ the same number of workers. According to the latest figures from the Bureau of Labor Statistics, the federal government has 2,800,000 employees. State governments employ 5,000,000 workers, and local governments have 14,000,000 workers, largely because local governments are the ones who employ teachers. So the federal workforce can grow even as the total number of government workers falls.”

“And that’s exactly what’s been happening. The BLS has a data series — CES9000000001, in case you’re interested — tracking all government workers. It includes state, local and federal workers. And it reports that in February 2009, there were 22,577,000 government workers, and in May 2012, there were 21,969,000 government workers, for a total loss of 608,000 workers. Over the same period, the total number of private-sector workers, in case you’re interested, rose from 110,260,000 to 111,040,000, for a gain of 780,000 workers.”

Fair enough.  His graph referenced all Public sector employment and indeed this segment of the economy has seen a lower employment recovery in this recession as compared to the previous 3 recessions.

But here is my issue.  The State and Local employment numbers are particularly bleak during this recession because the Private sector employment numbers are horrendous and if the Private sector (which far outnumbers the Public sector) isn’t employed then they aren’t paying State and Local taxes so these governments must make cuts to stay within budget.  Hiring more Public sector workers is not the solution out of this problem but more a symptom of this problem.  And the main problem is that Keynesian economics has failed us miserably during this ‘recovery’ and I’ll prove it below.

Let’s first look at the last four recessions and I determined their starting points using the Wikipedia link here and the Bureau of Economic Analysis here.

From these links, the last 4 recessions started on January 1980, July 1990, March 2001 and July 2008.  I then used the Bureau of Labor Statistics report LNS12000000 at the following site to get monthly employment data for the Private sector.  We have data up to May 2012 and that is 46 months from the start of the last recession so that is the time frame I’ll use to compare this recession ‘recovery’ with the recoveries from the prior 3 recessions.

Here is the graph of Private sector employment changes from the start of the last 4 recessions.

Sure enough, you can see that the Private sector has not rebounded like the previous 3 recessions and this would explain why Public sector employment has also not rebounded like we’ve seen in the past.  We simply don’t have the tax revenue flowing into State and Local governments so they have to tighten their belts and delay hiring.

Private sector employment far outnumbers Public sector employment so this is a better metric to measure how well we have recovered from a recession.  Public sector employment will take care of itself as long as we focus on the Private sector but unfortunately Obama, Pelosi and Reid have failed the recognize this.

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4 Responses to No, The Private Sector Is Not Doing Fine

  1. Pretty cool that you got a response from Ezra Klein. Nice graphs too.

    Why is the 2008 recession so different from the previous three? My first thought is there must be a structural reason, such as the loss of domestic manufacturers. Or it may be that new home construction, which traditionally buoys American recovery, has been depressed by the post-bust surplus inventory. Whatever the reason, Pres. Obama has had 3.5 years to identify and deal with it. November can’t come fast enough.

    • cosmoscon says:

      Thanks for the comments CogitatingDuck! My thoughts on the prolonged nature of this ‘recovery’ are related to business killing regulation and the poor expectations (related to OLbamacare, etc.) whcih cause businesses to scale back.

  2. Pingback: OK Conservatives, Now What? | cosmoscon

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