Fin - Daily Ticker - US

More Pink Slips Coming for Public Employees: Is Austerity the Right Rx for a Weak Jobs Market?

Government -- on every level -- used to be the one employer most notable for offering the best job security. But that is not the case anymore.

State and local governments have been shedding jobs to the tune of about 23,000 jobs a month for the last three months, while the private sector has been gaining ground, albeit in small bits. In May, the public sector lost 29,000 jobs and now, a new forecast by IHS Global Insight expects roughly 110,000 more government jobs to be lost in the third quarter of this year. (See: The May Jobs Report Highlights Troubling Trends)

"Though tax revenue is starting to rise, states are still wrestling with multi-billion-dollar budget gaps. Federal stimulus funds helped minimize job cuts until now, but that money essentially runs out on June 30," CNN reports. "So states are planning to slash funds for education, social services and local governments, as well as downsize their payrolls even more, in the coming fiscal year."

Meanwhile, Crain's is reporting Illinois' highway construction halt could mean 31,000 layoffs by mid-June and another 21,000 from the shutdown of hundreds of other capital construction projects.

Austan Goolsbee, chairman of the President's Council of Economic Advisers, was out on the Sunday morning talk show circuit talking up and putting a positive spin on the overall dismal May jobs number — only 54,000 nonfarm payrolls added in May and the unemployment rate ticked back up to 9.1%. "One month is not a trend," he told CNN's Candy Crowley. "In the last 6 months, we've added a million jobs to the economy. In the last 15 months, we've added 2 million jobs."

But for government jobs, the downward trend is undeniable, as The Daily Ticker's Aaron Task and Henry Blodget discuss in the video above. Not only has government employment been shrinking this year, the public sector has lost 510,000 jobs since the peak in August 2008.

This reality brings into focus a bigger issue: Is austerity the best medicine or should more stimulus spending be pumped into the system to kick-start the economy and job recovery?

Tell us what you think!

View Comments (39)