What to Watch on Jobs Day: Signs of life in stalled public-sector employment?

Over the last few months, we’ve seen signs of labor market cooling (though from a very strong base): the historic decline in job openings in August; moderating wage growth; and employment losses in interest-rate-sensitive jobs.  

Private-sector employment rebounded fantastically following the pandemic recession because Congress made fiscal investments at the scale of the problem, and employment in the private sector exceeded pre-pandemic levels by July 2022. While the recovery continues to chug along, with rising labor force participation and prime-age employment-to-population ratio approaching pre-pandemic levels, the one sector that has failed to recover and has actually stalled for much of this year is state and local government employment.  

Figure A shows the dramatic fall in the private sector and the subsequent strong and swift rebound. This bounce back is especially notable in comparison to the prolonged, austerity-starved recovery from the Great Recession. Private-sector employment is now 0.7% above pre-pandemic levels, while public-sector employment at the state and local level remains 3.2% below its February 2020 level, though it experienced far fewer losses than the private sector in the early months of the pandemic. Public-sector employment also suffered in the aftermath of the Great Recession, but for many of the same reasons private-sector employment faltered—the rise in austerity policies at all levels of government choked off the recovery. As a result, it took until 2018 for state and local public employment to recover to its pre-recession level. 

Private-sector jobs fell further and bounced back faster in the pandemic labor market: Percent change in payrolls since February 2020, for all private and state and local government employment

Date Total private-sector employment State and local government employment
Feb-2020 0.00% 0.00%
Mar-2020 -1.11% -0.35%
Apr-2020 -16.21% -4.94%
May-2020 -13.80% -7.36%
Jun-2020 -10.32% -7.41%
Jul-2020 -9.33% -7.06%
Aug-2020 -8.39% -6.05%
Sep-2020 -7.65% -6.08%
Oct-2020 -7.03% -6.14%
Nov-2020 -6.72% -6.06%
Dec-2020 -6.80% -6.09%
Jan-2021 -6.48% -5.57%
Feb-2021 -5.94% -5.50%
Mar-2021 -5.44% -5.23%
Apr-2021 -5.28% -5.01%
May-2021 -4.98% -4.65%
Jun-2021 -4.59% -4.39%
Jul-2021 -4.10% -4.14%
Aug-2021 -3.72% -4.04%
Sep-2021 -3.40% -3.96%
Oct-2021 -2.87% -4.02%
Nov-2021 -2.38% -3.94%
Dec-2021 -1.95% -3.76%
Jan-2022 -1.57% -3.72%
Feb-2022 -1.03% -3.66%
Mar-2022 -0.73% -3.59%
Apr-2022 -0.45% -3.54%
May-2022 -0.19% -3.27%
Jun-2022 0.08% -3.48%
Jul-2022 0.45% -3.28%
Aug-2022 0.68% -3.23%


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