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With a Revival in Housing, do U.S. Government Payrolls Turn Around?

John Blank



My discussion topic today is payrolls of a different kind.  


In April 2009, six months after the collapse of Lehman Brothers, government payrolls in the United States hit a cyclical peak of 22,675,000 employees.  Since then, with the exception of a spike tied to employees conducting the U.S. Census, the number of government employees has declined steadily month-after-month.  


In August 2012, U.S. government payrolls had declined to 21,900,000.  That is a loss of -775,000 jobs in 40 months, or roughly -20,000 employees a month.  But in August 2012, this critical loss of jobs slowed notably, down to -7,000.


This has been the steady march of a U.S. version of austerity.  And it has made for a negative feedback loop inhibiting momentum in overall U.S. payroll numbers.  


One must conclude that the tax base that supported so many jobs in State and Local governments and at the Federal level had dissipated with the Economy.


At the State and Local level, a large amount of tax support comes from property taxes.


Now, with the housing market reviving property values across the country, does this mean this type of government payroll bloodshed is over?


Or does this government payroll chart suggest more bloodshed?


The government payroll chart says that to get back to 2002 levels of government hiring and spending, U.S. government’s need to shed another 400,000 jobs, which at the current pace averaging -20,000 a month means 20 months more of pain?


What do you see in your community, state, and region?


Are we about to see this particular drag on overall payrolls and employment reverse?


And if so, is it also time to take a look at Municipal bond funds?


A few popular Muni Bond ETFs are listed below:


SPDR Nuveen S&P VRDO Muni Bond EFT (VRD) with New York, Texas, and Pennsylvania exposure.


Powershares VRDO Tax-Free Weekly (PVI) with New York, New Jersey, and Texas exposure.


Market Vectors CEF Municipal Income (XMPT)


Finally, is a reversal of fortune in our government’s payrolls going to be a new source of strength for overall payrolls and the stock market?


Read the analyst report on VRD

Read the analyst report on PVI

Read the analyst report on XMPT

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