Tag Archives: public sector employment

Think of the Children

ChildrenSpare me the piteous cries of, “Think of the children and grandchildren!” emanating from the right wing when any allocation of resources is mentioned which could possibly help darn the holes in our social safety net programs.  IT (whatever it might be) will burden them with the horrible no good awful national debt — unless, of course we’re talking about reducing taxes for millionaires, billionaires, oil companies, hedge fund managers, and ….  Nevada’s managed, yet again, to hit the bottom in the Child Well Being category. [RGJ]

One of the nice things about thinking in ideological generalities is that one’s not required to consider the practical, all too real, consequences.  For example, that Nevada ranks 48th in the child well being category in the Kids Count analysis. (pdf)

That would be 48th in overall ranking, 47th in economic well being, 50th in education, 47th in health, and 44th in family/community rank.

These rankings aren’t something to dismiss out of hand. First, the Annie E. Casey Foundation is a private philanthropy based in Baltimore, MD, that specializes in compiling statistics on children’s environments, and promoting cost effective solutions for legislative and community consideration — and it’s been doing this since its inception in 1948.

Nor is the Foundation merely a font of doom and gloom, when speaking of trends in child welfare, they note some progress in the overall safety and well being of children since they started their Data Book project in 1990:

“There also is a positive trend in parental education that benefits kids: A smaller percentage of children live in families in which no parent has a high school diploma — from 22% in 1990 to 15% in 2012. In addition, the teen birth rate is at a historic low and the death rates for children and teens has fallen as a result of medical advances and increased usage of seat belts, car seats and bike helmets.”  [AEC]

So, how did Nevada get into negative territory? In 2008 the number of children in the state whose parents at least 35 hours per week for 50 weeks per year (classified as employment insecurity) was approximately 173,000, or about 26%.  By 2012 that number increased to 226,000 or 34%.  In 2008 there were 54,000 children living in Nevada homes in which at least one parent was unemployed.  In 2012 the number was 79,000, or about 12%.  [AECF]

Measuring by the number of children living in homes in which the family income was less than twice the official federal poverty level and at least one parent was working at least 50 weeks per year (defined as low income working families), Nevada had 68,000 children in that category in 2008, a number which increased to 88,000 four years later. [AECF]

Have we been mentioning that what this state needs are JOBS? Once more, spare me the “we can’t afford it” wailing when we speak to the necessity of maintaining and improving our state infrastructure — and thus creating JOBS.  When the 2007-08 Recession pounded the state of Nevada, Las Vegas lost 1,053 public sector jobs, while the state pared down a total of 2,170. [CEPR] In the Pie/Sky ideological generalities of the right wing this would be a good thing — fewer public employees — but when the brass tacks are counted this means fewer teacher’s aides, librarians, educational special services, kitchen employees, road maintenance workers, parks and recreation employees, police officers, firefighters, and so on. In other words — these aren’t the “bureaucrats” so belittled by the conservatives, they are the people who do jobs which improve communities.

We’ve lost about 4.08% of our state workforce, another 10.77% of our local workforce, and 9.03% of those classified as “state/local” since the Recession. [Governing]

Another grating refrain is the moan that we are “transferring money from the private sector to the public.”   In the rarefied atmosphere of ultra-conservative thinking this means that tax revenue is collected from private sources and used for public services, which is somehow determined to be a “bad” idea.  Since when was it “bad” to have well maintained roads, well stocked libraries, pleasant and useful parks, good schools, safe neighborhoods, responsive fire departments, and all those features which real estate agents tout as part of the “excellent location” of the houses they are trying to sell?

Or, to look at it from the other angle — what effect does it have on a person’s property value to have failing schools, unkempt parks, inadequate libraries, and slow response times from fire and police services?  In this realm, the ultra-conservatives fall easily into the Something for Nothing crowd; they certainly don’t want declining property values, but they don’t want to pay the taxes necessary to keep the value of their property increasing.  They want the assets which factor into their property value — they just don’t want to pay for them.

Private sector employment has done better in the Silver State. Nevada’s climbed up from a dismal 10% unemployment rate this time last year to a 7. 7% unemployment rate as of June 2014. [BLS] That’s a nice 2.3% increase, putting us in the running for the most private sector jobs created in the last year.  If we’d decide to do something about our 149 high hazard dams, our $2.7 billion worth of drinking water infrastructure needs in the next two decades, our $2.9 billion in waste water treatment needs in the same period, our 40 structurally deficient bridges, and the 20% of our roads which are classified as in poor or mediocre condition [ACE] perhaps our employment numbers would be even better?

Perhaps if more parents were working we’d not see the disparity in the numbers of youngsters attending pre-schools?  The number of children from families functioning on less than 200% of the federal poverty level who are not getting some sort of early childhood education increased from 24,000 in 2005-07, to 31,000 between 2010-12.  The number of preschoolers from families in which the income was above 200% of the federal poverty line who were enrolled in some form of early childhood education increased. In 2005-07 about 67% of the kids were not enrolled, a percentage which improved to 60% by the 2010-12 period. [AECF]

The specific indicators on which Nevada’s rankings were based are available online at this location.   As with all compilations, there’s good news and bad news, gaps and spaces.

However, finding indicators of improvement should not divert us from trying to do something about those miserable national rankings.

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Filed under Economy, Nevada politics, Politics

The Numbers Are Nice, What About The People?

Construction project7.5% unemployment sounds good.  If Nevada’s numbers follow the national trend then we’d expect another decrease in statewide unemployment, also a good thing.  However, we need to temper our enthusiasm with a nod to some other numbers which aren’t quite so reassuring.

Not all employment is created equal: “The workweek fell from 34.6 to 34.4 hours.  As a consequence the index of aggregate hours worked fell -0.4%, offsetting last months 0.4% increase.”  [AB] [BLS table B4] It’s fine to have more people working, but if they are working fewer hours then the amount of spending those families can afford doesn’t move the needle in terms of aggregate demand.

Not all wages are created equal:  There’s weakness in average hourly wages as well. Average hourly wages were $23.42 in April 2012 and a year later they’d ticked up to $23.87 — insufficient to keep up with inflation. [BLS Table B3] Leisure and hospitality wages, which are of interest to Nevadans, averaged $13.35 per hour in April 2012 and increased to an average of $13.42 as of April 2013. [TableB3] Rather an underwhelming increase.

Public Sector employment remains weakened:  For the “Drown Government in a Bath Tub” crowd this is taken as good news, but the problem is that public sector employees are also consumers and their contributions to aggregate demand are declining.  Overall employment at all levels was down 11% since March 2013.  This figure breaks down to a decline of 8% in federal employment, a 1% decline in state workers, and a 2% decrease in local government employment.  [BLS TableB1] At some point in the discussion we need to ask just how small the bathtub is supposed to be?

If we exclude radical libertarian ethereal musings about an entirely privatized system in which we all drive on toll roads the moment we leave the driveway, or all hire our own security and fire protection services, and all our schools, libraries, parks, and public health services are for-profit institutions in which you can get only what you can afford to pay for — then we need to specify which public services we expect, and what level of service is acceptable.  How long are we willing to wait for our IRS tax refund checks?  How long is an acceptable response time for police and fire calls?  How many days should the library be open?  How many children in a single classroom are acceptable?  How long should it be between health inspections in work places, medical service providers, restaurants?

Not all jobs are creating assets:  The Construction sector continues to be weak, with YOY nonfarm payroll numbers down 6%, with residential construction down 6.2% and non-residential construction off by 4.8%.  Heavy construction and civil engineering was down 3.8% since last March. [BLS TableB1]

Given the state of our nation’s infrastructure the decline in heavy construction and civil engineering projects is particularly disturbing.  The President’s Rebuild America Partnership proposal remains mired in Congressional inattention, and partisan bickering.  S. 387, a bill to establish an American infrastructure investment fund was introduced in the Senate last February, and now sits in the Senate Commerce, Science and Transportation Committee.   The website for this committee doesn’t show any hearing scheduled for this bill to date.

One of the nicer features of infrastructure investment is that it is a Win-Win proposition; engineers, contractors, and their employees get paychecks and the contracting agency gets valuable assets enhancing the unit’s overall financial position.  Senate inaction, exemplified that the body only managed to pass 2% of the bills put before it so far, isn’t helping our economy by assisting in the creation of construction sector jobs or by aiding the financing of public agency assets.

Not all jobs are full time:  Full time employment is obviously distinct from long term temporary or contracted employment.

What’s changed in the last 20 years is that there’s been an unraveling of job security in the labor market, as well as a diminishment of benefit packages and a deterioration of stable, reliable wages and promotion pathways,” said Katherine Stone, a law professor at the University of California, Los Angeles, and labor specialist. “There’s been a really fundamental shift in the nature of employment — it’s a sea change. Whether you’re talking about the expanded use of short-term employees, temporary workers, project workers, contractors or on-call workers, the use of workers who don’t have regular jobs has increased a lot.”  [CBS]

Regular, traditional long term employment, increases the inclination to secure more expensive long term assets — durable goods and housing. The employment numbers may mask a situation in which we have more people employed, but not in jobs that induce them to make personal investments in durable goods or in long term housing.  While independent contractors may, indeed, prefer project to project employment — there’s the other 50% of temporary workers who would prefer full time employment.

In April, the number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 278,000 to 7.9 million, largely offsetting a decrease in
March. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.  (See table A-8.) [BLS]

The good news from the unemployment report this month is offset by weakness in the wages and hours figures, nor is it enhanced by the acknowledgement of continued weakness in the construction sector and the inattention to our infrastructure investment needs.  Additionally, we need to carefully monitor the trends toward temporary job creation as compared to more permanent jobs created as a result of increased aggregate demand.

Congress could help.  It could, for example, take up the American Jobs Act instead of attending to a plethora of ceremonial votes to “repeal Obamacare,” and continue its “War on Women.”  The Senate could assist by scheduling hearings and giving consideration to S. 387.

If we’d like even more optimistic news on the economic front it will probably be up to American citizens to insist that our federal legislators focus on JOBS, JOBS, JOBS.

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Filed under Economy

Be careful with questions, they often have answers

Fresh from a convention which dramatically promoted Bold New Ideas from the Nineteenth Century, the ever-innovative GOP has a NEW question for the 2012 campaign — Are you better off than you were four years ago?  Somehow, I think perhaps I’ve heard that before somewhere… oh, I remember, 1980?

And the answer is a resounding YES.  If we are speaking in general economic terms, we are much better off, and trending in the right direction.  Taking one of the most general measures, the Gross Domestic Product, things are looking much better than they were in late 2008 – early 2009.

Now, let’s add some highlights to the same graph:

We get a bonus in this category, not only do the figures indicate we are better off in terms of the improvement in our Gross Domestic Product, but the ARRA appears to have mitigated the worst impact of public sector layoffs, strain on the automatic stabilizers, and problems in the construction sector.

What about employment?  We’re better off in that economic category as well:

Taking a purely Cartesian view of the graph above shows the “numbers” moving from the 3rd Quadrant wherein all things are negative to the 1st Quadrant in which all things are positive.  However, it’s not necessary to have been thrilled to sit in Algebra II in order to observe that in terms of employment the situation is much better than it was in late 2008.

So, why doesn’t it FEEL better?  The CBPP offers this explanation —

“Although employers began to add jobs in 2010, the economy has recovered only about 4 million of the 8.7 million jobs lost between the start of the recession in December 2007 and early 2010. As a result nonfarm payroll employment was 3.4 percent (4.7 million jobs) lower in July 2012 than it was at the start of the recession.” (emphasis added)

A rough analogy might be that we’re economic “sophomores,” one of the traditionally  more difficult years in high school — and the year in which the oldsters now were then parked in that Algebra II class — we knew we weren’t lowly freshman anymore, but the “end” looked to be off in some distant horizon unreachable in human terms.  We obviously have some work to do to get back to pre-recession employment levels.

Another reason the economic situation may not “feel” as good as the days before the Wall Street Wizards drove the American economy into a very deep ditch is that the jobs lost tended to be middle income level,  while the jobs gained tend toward the lower end of the pay scale.  There’s a chart for that, too, from the National Employment Law Project:

Readers preferring the numbers will note the NELP study showed: “Lower-wage occupations constituted 21 percent of recession losses, but 58 percent of recovery growth. Mid-wage occupations constituted 60 percent of recession losses, but only 22 percent of recovery growth.  Higher-wage occupations constituted 19 percent of recession job losses, and 20 percent of recovery growth.”  (emphasis added) See also: NYT.

What American workers are facing is called “job polarization,” as Catherine Rampell explains in her NYT article:

“Job growth has been concentrated in positions that tend to fall into two categories: manual work that must be done in person, like styling hair or serving food, which usually pays relatively little; and more creative, design-oriented work like engineering or surgery, which often pays quite well.

Since 2001, employment has grown 8.7 percent in lower-wage occupations and 6.6 percent in high-wage ones. Over that period, midwage occupation employment has fallen by 7.3 percent.”

Those mid-wage jobs lost tended to be in manufacturing in which automation and off-shoring account for considerable, and permanent, job declines and public sector employment for teachers, law enforcement personnel, firefighters, and other middle class wage level public employees.  [NYT ] Down-sizing government means hiring freezes, or layoffs, and the loss of those wages recycling back into the economy.  To borrow a GOP analogy — it’s not hard to reduce the size of government until it could be drowned in a bath tub — BUT we’re draining those wages out of the economy along with the reductions.

Yet another reason for the bind in middle income jobs is that the construction industry still hasn’t recovered from the Housing Bubble puncture.  Construction sector employment peaked in January 2006 when banks were still happily handing out mortgages of questionable terms and provenance in order to sate their appetite for more fodder to create highly profitable asset based securities and their derivatives.   In numerical terms, the Bubble Collapse and subsequent recession eliminated approximately 2.21 million construction sector jobs. [CalcRisk]

The Prescription:  If we accept three fact-based propositions in regard to the employment bind the policies necessary to address the real issues becomes more clear.  (1) The reality is that the economic pit into which we tumbled was deeper than advertized.  (2)  Most of the jobs lost tended to be middle income employment. (3)  Those middle income jobs tended to be in the public sector and in the construction industry.

In order to address these three realities any “jobs” plan presented by any politician should (1) seek to halt the decline in public sector employment of teachers, police officers, firefighters, and public service personnel who live and work in communities which need their economic contributions to sustain their economies.  Contrary to the half-baked but often served conservative image of The Greedy Public Employee munching vigorously at the trough — these are people who pay taxes, make mortgage payments, purchase automobiles, shop at the local grocery, buy furniture, and otherwise contribute to local economies.

A real “jobs” plan should (2) immediately and directly address the situation in the construction sector.  There is a real opportunity here to reprise our Greatest Generation and repair, replace, or maintain the physical legacy of their efforts especially in terms of our infrastructure.  We have construction companies seeking to bid for infrastructure related contracts, workers ready and willing to work to complete those contracts, and an almost unconscionably long list of roads, bridges, dams, water treatment facilities, airport facilities, and sewer treatment plants that demand renovation.

A real “jobs” plan should (3) acknowledge that some of the manufacturing jobs of old are not coming back, and that in order to promote industrial growth we need to look to new technologies and offer greater support for innovation.  We dismiss new alternative energy technologies at our peril, because while some Republicans are dismissing solar and wind tech as “passing fads” the Germans and the Chinese are investing in them such that they will be permanent and profitable segments of their economies.

The answer to the question is YES, we are better off than we were four years ago, and YES we could be doing better.  The answer is definitely NOT to “elect a Republican, give the top 0.1% another big tax cut, and hope the Chinese and the Germans see the ‘error’ of their ways.”  Such a response is the economic policy equivalent of telling the patient to take two aspirin, and to ignore what’s really causing the pain.

 

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Filed under 2012 election, ARRA, Economy, Infrastructure, public employees, Republicans

Sunrises and Tax Cuts: One Sure, the Other Not So Much

<Snark> I do hope you appreciate my efforts this morning. I got up nice and early — more a function of a miniature dachshund who had tangled himself in a sheet than an intention — and took my coffee to the deck and Bid The Sun To Rise! <snark>  OK, it wasn’t this sunrise, which is a stock graphic, and much better than this morning’s cloudy rendition.  Now to the point.   The Rolls-Royce Ticket (Romney/Ryan) has Promised an increase of 12,000,000 jobs!

Right there in the acceptance speech: “And unlike the president, I have a plan to create 12 million new jobs.” [Politicususa]  This would be lovely, except that it is roughly analogous to my claim of bidding the sun to rise; it’s probably going to happen anyway:

‘In its semi-annual long-term economic forecast released in April, Macroeconomic Advisers projected that the economy would add 11.8 million jobs from 2012 to 2016. That means Mr. Romney believes his newly announced policies would add an extra 200,000 jobs on top of what people already expected, or a jobs bonus of about 2 percent. The more jobs the better, of course, but that’s not really much to write home about.” [NYT]

And, actually the President HAS a plan to create jobs — the American Jobs Act. S. 1549 was introduced by Senator Harry Reid (D-NV) on September 13, 2011.  That it has not moved since isn’t a function of “Presidential Leadership,” but of good old fashioned Republican intransigence.

The legislation includes tax cuts and regulatory reforms for small businesses and entrepreneurs.  But, the GOP doesn’t want to move on it.

The legislation includes provisions for preventing teacher layoffs, hiring more veterans, investments in infrastructure projects, public-private projects for rehabilitating local communities.  But the GOP doesn’t want to vote in favor of these elements.

The legislation promotes work based reforms to create innovative ways to retrain, rehire, and re-employ American workers.  But the GOP doesn’t want this to come to the Senate floor.

The legislation also encourages more re-financing of homes for stressed home-owners. But the GOP doesn’t want to talk about this either.  [AJAfactsheet]

The level of Republican intransigence can be measured by the number of tax cuts they passed up in order to block this legislation:

#1. The Republicans rejected a provision which would cut the payroll tax in half to 3.1% for employers on the first $5 million in wages, providing broad tax relief to all businesses but targeting it to the 98 percent of firms with wages below this level.

#2. The Republicans rejected a full holiday on the 6.2% payroll tax firms pay for any growth in their payroll up to $50 million above the prior year, whether driven by new hires, increased wages or both. This is the kind of job creation measure that CBO has called the most effective of all tax cuts in supporting employment.

#3. The Republicans rejected a proposal for 100 percent expensing, the largest temporary investment incentive in history, allowing all firms – large and small – to take an immediate deduction on investments in new plants and equipment.

#4. The Republicans rejected the Returning Heroes Tax Credit of up to $5,600 for hiring unemployed veterans who have been looking for a job for more than six months, and a Wounded Warriors Tax Credit of up to $9,600 for hiring unemployed workers with service-connected disabilities who have been looking for a job for more than six months, while creating a new task force to maximize career readiness of service members.

#5. The Republicans rejected the AJA including the plan to expand the payroll tax cut passed last December by cutting workers payroll taxes in half next year. This provision will provide a tax cut of $1,500 to the typical family earning $50,000 a year. As with the payroll tax cut passed in December 2010, the American Jobs Act will specify that Social Security will still receive every dollar it would have gotten otherwise, through a transfer from the General Fund into the Social Security Trust Fund.

The Mornings After

Gee, and here we thought that the sun will rise in the east every morning, and Republicans will always favor tax cuts.  Yes, the President had, and still has, a specific plan to increase employment in the good old United States of America — but as of October 14, 2011 the plan ground to a halt in the face of Republican opposition in the Senate:

President Obama’s $447 billion jobs plan foundered in the Senate on Tuesday night, as a unified Republican caucus and a pair of Democrats joined to deny the proposal the 60 votes needed to allow it to proceed to full consideration.  [WashMonthly]

Any claims of “bipartisan rejection” of the bill can be waived because the two “no votes,” from Senators Nelson of Nebraska and Tester of Montana, wouldn’t have broken the GOP filibuster of the American Jobs Act.  The cloture motion failed on a 50-49-1 vote. [roll call 160] It takes 60 to break a filibuster and the best the Democrats in the Senate could have mustered was 53.  *Senator Reid voted ‘no’ to be on the prevailing side so he could later offer a motion to reconsider under the rules.

Yes, the bill includes tax cuts, and YES it’s paid for, and yes, the Republicans, in a “unified Republican caucus” blocked it.  Now, we get the vague sound of whining as the sun rises.

The Republicans whine, “but the President hasn’t shown leadership on jobs creation,” an interesting wail since the President presented a piece of legislation all packaged nicely with tax cuts and infrastructure investments.   It really doesn’t do for me to park my pickup across your driveway and then criticize you for not driving your children to school.

The Republicans whine, “the bills are too big and complicated,” but when parts of the legislation are offered in the Senate those are filibustered as well.  This comes perilously close to refusing to eat at the restaurant because the menu’s too long, but when offered items a la carte refusing each one.

According to GOP candidate Governor Mitt Romney:  “The President doesn’t have a plan, hasn’t proposed any new ideas to get the economy going—just the same old ideas of the past that have failed.”  [Prospect]

The Republican complaint would have far more authenticity had they worked with the Democrats in the Senate to pass the infrastructure and rehabilitation portions of the American Jobs Act; indeed, the ONLY specific  jobs proposal on the table at the moment  is the aforementioned American Jobs Act.  Governor Romney’s complaint would have far more resonance if he would offer something besides the trickle down economics of Republicans Past.  Speaking of no new ideas… in the words of the Rev. Al Sharpton, “We got the trickle, but nothing came down.”

The sun will rise tomorrow morning whether I take my coffee on the deck or not, the economy will probably create about 11.8 million jobs even if we do nothing, and the Republicans will filibuster anything from the White House whether it has a package of tax cuts in it  or not — just because it came from the Democratic side of the spectrum.

Perhaps candidates in Nevada’s Senatorial race, and in the Nevada Congressional District races should be asked whether or not they support the American Jobs Act, or even portions of it?  Perhaps it’s time we got some answers that aren’t merely more predictable-as-the-sunrise rhetoric?

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Filed under 2012 election, Economy, Filibusters, Obama, Romney, Taxation, Veterans

Four Charts the GOP Would Like You To Ignore

The argument about the “private sector” doing “fine” could be over in a few moments IF more people were familiar with a wonderful research tool provided by the St. Louis Federal Reserve, FRED.

Business Insider has an informative collection of charts from FRED demonstrating what President Obama has been trying to say all week — the private sector has rebounded from the worst of the Recession of ’08 but the public sector has taken a dramatic downturn.

That blue line is headed up nicely.  Corporate profits are doing quite nicely…even after taxes.  We know that Wall Street is doing well, thank you very much Mr. & Mrs. American Taxpayers, but how about non-financial corporate profits?

Seems like they’ve been doing reasonable well during the Obama Administration too.   So not only have the Wall Street Wizards been doing well for themselves, the other non-financial corporations have been doing well also.

Employment?  What have employment levels in the private sector been doing during the Obama Administration?

Hmm, not all that badly!  The red line is headed in the right direction, and has been since 2010.

Now, when the President said the public sector was the one taking a beating, here’s part of that picture.

For the “Drown The Government In The Bath Tub” and get  “Something for Nothing” Crowd — the previous graph is a dream come true. For fire departments, school districts, and law enforcement agencies it’s been a nightmare.   There’s more in the Business Insider article on this topic.

Since you’ve taken a look at four of the more important graphs, here are a couple of bonus ones for you.  Let’s take a look at the civilian unemployment rate, and the real GDP charts.

Again, the trend lines are  headed the right direction.   The Bush Recession of ’08-09 in the gray shaded part of the graphs provides an illustration of what happens when de-regulation combines with financialist fervor for the next really big “Thing” (like credit default swaps and synthetic CDOs) and the resulting volatility knocks the props out from under the financial system and the rest of the economy.   Now, do we really believe Republican candidate Governor W. Mitt Romney when he says that Everything Is Just Icky right now, so it is imperative we select a financialist to oversee the deregulation of financial markets and the revival of Trickle Down Voo-Doo Economics?

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Filed under 2012 election, Economy, financial regulation, Obama, Romney

Jobs, Jobs, Jobs and Numbers, Numbers, Numbers

As promised, here’s a closer look at the jobs report released today by the Department of Labor.  If we take the 69,000 total apart and look at the separate categories of private sector employment there’s an interesting picture:

We can see more clearly now which jobs ARE being created, and which are not.  Healthcare added 33,000 jobs, transportation and warehousing added another 36,000.  Manufacturing was up 12,000. Temporary professional services gained 9,200.  Full time professional services dropped about 1,000.  The financial sector added 3,000 jobs, retail added 2,300, and wholesale jobs increased by 15,900.

The drag? We lost 13,000 government jobs, 9,000 leisure and hospitality jobs, and 28,000 construction jobs. [BLS Table B]

Here’s where the ideological wheels meet the real world road.

If the ultra-conservative ideology is correct, then the reduction of government jobs should boost the overall economy?  That’s the theory, and one espoused by Republican candidate Mitt Romney:

“Romney, by contrast, would make immediate, drastic moves toward austerity. His deficit plan would slash federal spending to 20 percent of GDP by 2016, and as low as 18 percent of GDP in later years—well below historic averages. In addition, Romney’s plan bets that lower tax rates will spur economic growth, boost the economy, and return the country to an era of budget surpluses and prosperity.” [NatlJournal]

That’s the plan, cut government programs (reducing the federal payroll), privatize Medicare (vouchers), and send everything that can be packaged into block grants back to the states.   So, we’d have to ask: If we have shed about 1,000,000 public sector jobs in the last few years — then why haven’t we seen more robust gains in private sector employment? [FTimes]  If during the Obama Administration some 600,000 public sector jobs have been eliminated,  where is the vaunted economic growth that was supposed to happen?

Reuters offered an analysis of the drag on the economy created by the loss of public sector employment last April:

The result? The last three years of job losses at the state and local government level has been the most dramatic since Labor Department records began in 1955, according to a Reuters analysis.

Public-sector employees tended to have more job security, which in some ways helps during weak economic climates, as their steady demand for goods and services spread through the economy. The recent trend, conversely, can make things worse.

“If public-sector employment had grown since June 2009 by the average amount it grew in the three previous recoveries (2.8 percent) instead of shrinking by 2.5 percent, there would be 1.2 million more public-sector jobs in the U.S. economy today,” said the Economic Policy Institute in a recent report, which included federal employees in the calculation.

Yes, we’ve come right back to the demand side of the classic market equation.  The lost demand for goods and services created when public sector jobs were eliminated is a drag on the economy especially during a recessionary period.  There is an argument to be made that the job security and spending capacity of public sector employees, health inspectors, teachers, firefighters, police officers, public health nurses, highway department employees, etc. acts as one of those automatic stabilizers cushioning the shocks to a retracting economy.

The illogical extrapolation of this notion is that “Gee, then all we need are public employees…” No.  What we need are infrastructure construction and maintenance, and public services, which not only meet the needs of the community but also serve to sustain demand for goods and services in local economies during tougher times.   The magic word is Balance.

The question we now need to ponder is what will get the economy moving forward at a more rapid pace?  Tax Cuts for wealthy Americans?  Infrastructure spending and small business incentives to boost employment in the construction  and other sectors?

Republican members of the House of Representatives are fond of asserting they’ve passed some 30 “jobs” bills.  However, in their enthusiasm to repeal the Affordable Care Act, to repeal Dodd-Frank, to reform Medicare out of existence, to preserve taxpayer subsidies for fossil fuel corporations, to cut taxes for the top 0.5% of American income earners, and to slash funding for infrastructure programs (all of which they have characterized as “Job Creating” measures) —  their proposals would cost a potential 700,000 jobs in H.R. 1; approximately 300,000 jobs lost in regard to H.R. 2; and, perhaps a total of 1.7 million jobs lost by 2014 per H.Con.Res. 34. [Gavel]

There is an alternative available, S. 1549.   It is stalled in the United States Senate, tagged with the all too familiar Republican filibuster.  There are some component which could have a positive impact on the economy much sooner than waiting for the tax breaks for billionaires to trickle down to the local county road department. *(See American Jobs Act)

One component is the Buy American provision, requiring that items procured for the maintenance or construction of public works be made in America.  There could be some “wiggle room” for negotiation to allow for the acquisition of items which are no longer manufactured here, but this topic should be a started for further discussions.

Another component would give business owners some tax breaks: “amends the Internal Revenue Code to: (1) reduce employment and self-employment tax rates in 2012 to 3.1%; (2) allow employers a tax credit for payroll increases in the last quarter of 2011 and in 2012; (3) extend the 100% bonus depreciation allowance through 2012; (4) delay until 2014 the 3% withholding requirement on payments due to vendors who provide services to federal, state, and local governmental entities; and (5) increase the work opportunity tax credit for hiring unemployed veterans. ”   If tax breaks are the bread of conservative life, why would this be controversial?

There’s an infrastructure component which has drawn more fire: “Makes specified funds available to the Secretary of Transportation (DOT) for: (1) grants-in-aid for airport planning and development and noise compatibility planning projects under the airport improvement program (AIP); (2) Federal Aviation Administration (FAA) Next Generation air traffic control system advancements; (3) highway and bridge restoration, repair, and construction projects and for passenger and freight rail transportation and port infrastructure projects; (4) grants for high-speed rail projects, capital investment grants for intercity passenger rail service, and grants to reduce congestion on intercity rail passenger transportation; (5) capital grants to the National Railroad Passenger Corporation (Amtrak); (6) transit capital assistance grants; (7) capital projects for existing fixed guideway system modernization, replacement and repair of buses and bus-related equipment, and construction of bus-related facilities; and (8) discretionary capital investment grants for surface transportation infrastructure.

This is where the cat-calls about “nostrums of statism” begin from the right.  However, we are indeed a nation with antiquated air transportation systems, and love Amtrack, or not, it is invaluable in the NE corridor transportation grid.  We’ll probably not find too many members of the Republican caucus taking the bus — but thousands of their constituents take the bus daily to get to their jobs.

The cri de coeur from the right hand side of the political aisle really increases in volume when it’s suggested that the federal government could step in to help school districts, cities, and counties retain or rehire teachers, police officers, and firefighters laid off because of local and state budget cuts.  Speaking of “nostrums,” there’s little more vague or exaggerated than claims that if tax rates for the upper upper upper income earners are further reduced, then POOF! the economy will improve and state and local revenues will rise with the Yachting Tide.   The Speaker of the House of Representatives announced that the first stimulus bill was a failure before the money even got out the door, however the Republicans piously intone their mantra that we should at least wait another four years for the “benefits” of the Bush Tax Cuts to kick in.

The magic formula “Tax Cuts + Deregulation” was in effect for eight years of the George W. Bush Administration….. and we’re still waiting. In fact we’ve had nearly thirty years of tax cuts and deregulation. 

We can narrow it down and look at the last decade, and the economic picture of the efficacy of the Magic Formula simply isn’t there.

What is readily apparent is that some sectors of the economy are doing better than others.  Federal spending for infrastructure would more immediately benefit business owners in the construction sector and the employees who would be hired.  Arguing that these aren’t “permanent” jobs is silly.  There are precious few “permanent” jobs in a sector dependent on winning bids and hiring sub-contractors.

It’s also clearly visible that we cannot continue to decimate our public sector.  “Stack’em deep and teach’em cheap” is not a productive educational maxim.   Nor can we encourage business growth in our retail sector by seeking to minimize or privatize our public safety sector.   Commercial and industrial activity is curtailed if workers can’t find affordable and reliable transportation to and from the workplace.

Once again: Austerity never begat Prosperity.

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Filed under Economy, employment, Infrastructure, Obama

Very Interesting Charts and Graphs That Aren’t Showing Up On My TV

For those who like their economic information in pictures, there are some excellent sources for that, especially from FRED (St. Louis Federal Reserve).  Here’s one that came out on Friday, and  no one has been mentioning too much:

What does it mean? It means that any reading above 50 indicates that more companies than not intend to hire employees.  [Business Insider] And, obviously, we’re over 50.

And, here is another one: This one is simple — the deficit is down and unemployment is up.

We might be seeing better employment numbers if state and local governments weren’t having to pare down their workforces.

Dropping 11,000 teachers from employment rolls last month didn’t exactly help the recovery.   [CBPP]  If we accept that the national average salary for elementary school teachers is about $40,145 [Payscale]  those 11,000 layoffs take some $441,595,000 in spending power out of the economy.

OK, “Austerity” rhetoric has been exceedingly popular, but do austerity policies inspire consumer confidence?  Not according to this chart from Valance.   The Canadians have adopted the British Tory Austerity Program, and it doesn’t seem to be getting them anywhere:

We’re the RED line. The Canadians are in BLUE. JFOR concludes:

“…if the political environment changes in 2012 or perhaps 2013 after the November election, and more conservative voices gain traction in actual policy settings, then the US will follow the route taken by many of the Eurozone nations and Britain – that is, back towards recession. When private spending is strong enough the public sector can contract without damaging economic growth. So hopefully, US politicians will continue to be “irresponsible” and allow the deficit to shrink on its own via growth.”

Austerity never begat prosperity.

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Filed under 2012 election, Economy, public employees