State and Local Employment in the Covid Recession

Employment has been cut tremendously. With massive impending revenue shortfalls, state and local spending will continue to remain depressed, placing a drag on the economic recovery – just as austerity measures slowed the recovery from the Great recession.

Figure 1: State and local government employees, 000’s, s.a. (blue). NBER defined recession dates shaded gray; most recent recession assumed to run to May 2020. Source: BLS, NBER, and author’s calculations.

Update, 6/22/2020, 4pm Pacific: Wells Fargo forecast for growth in state and local government purchases:

Source: Wells Fargo, June 17, 2020.

4 thoughts on “State and Local Employment in the Covid Recession

  1. pgl

    During the Great Recession, the state and local governments were accused of running Herbert Hoover policies. As your graph notes, state and local governments cut employment even though we had some Federal revenue sharing. We should have had more.

    Today the fall in state and local government employment is off the charts but Mitch McConnell is holding up any efforts at Federal help for these local governments. Herbert Hoover on steroids!

    Reply
  2. macroduck

    The risk that state and local budgets would lock in a persistent drag on aggregate demand as of July has been obvious for some time. An end to supplemental jobless benefit payments will compound the problem if payments are not extended. Republicans seem to be shooting themselves in the foot by engineering a protracted economic chill with these two policies. I wonder if they will relent once primary elections are finished.

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  3. Barkley Rosser

    It is all but certain that the state and local governments are currently the most sharply declining part of the US economy. During the Great Recession, a full third of the Obama 2009 fiscal stimulus package was revenue sharing for those govenments. Out of the several trillion dollars budgeted so far in the CARES and HEROES stimulus packages, only $150 billion has been for state and local governments.

    So far, Trump and McConnell seem still to be operating under the delusion that the state and local governments that are hurting are all, or mostly, blue ones run by “Democrat” governors and mayors, while it is now clear that the vast majority of new cases are in red states and not fitting that descriptor. Soon those governments will be at their doorstep. Maybe then they will be more inclined to act in a responsible manner.

    Reply
    1. Barkley Rosser

      A correction: HEROES was passed by the House but not the Senate, so not policy. It actually provides a lot of aid to states and localities, which is one of the reasons it has not passed the Senate.

      Reply

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