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October 2004, Vol. 127, No.10
Employment in the public sector: two recessions’ impact on jobs
Since 1939, the public sector has increased its share of nonfarm employment by 3 percentage points.1 Overall, 1 out of every 6 jobs in the nonfarm economy is now in government. The 2001 recession affected Federal, State, and local governments in various ways. The largest sector, local government, was influenced the least, although a reduced rate of employment growth was evident in both 2003 and the first half of 2004. State government employment, the most cyclical in nature, peaked months before Federal Government, but well after total private employment. The Federal Government created a new agency in the aftermath of the terrorist attacks on September 11, 2001, while the U.S. Postal Service felt the brunt of the recession and continued experiencing financial difficulties. Growth in employment during and after the latest recession contrasts sharply with employment growth in the 1990–91 recession and subsequent recovery.
Total private payroll employment peaked in December 2000, but job growth in government boosted total nonfarm employment. The tide turned, however, when construction and information employment peaked in March 2001. Strength in government and in a handful of private service-providing industries (financial activities, health services, and leisure and hospitality) was not enough. Coinciding with the U.S. business cycle peak declared by the National Bureau of Economic Research, total nonfarm employment peaked in March 2001 and then declined until August 2003.2
The so-called jobless recovery of the 1990 recession became the period of comparison. The labor market continued to remain weak after the recession ended in March 1991, even as other parts of the economy gained momentum.3 In fact, nonfarm employment remained relatively flat and did not recover until early 1993. Despite the "jobless" epithet, the labor market fared better following the 1990s recession than following the 2001 recession. (See chart 1.) Payrolls grew by 876,000 jobs 21 months after the end of the 1990s recession, compared with 1,082,000 jobs lost 21 months after the 2001 recession ended. Employment slowly started to recover in September 2003. Compared with employment in private industry, government employment fared better during the later recession, but faltered after it ended.
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1 Data on employment used in this article are from the Current Employment Statistics (CES) program, which surveys 160,000 nonfarm businesses representing about 400,000 establishments monthly. For more information on the program’s concepts and methodology, see BLS Handbook of Methods (Bureau of Labor Statistics, 1997). CES data are available on the Internet at http://www.bls.gov/ces/. Data used in this article are seasonally adjusted unless otherwise noted.
2 For information on recessions, recoveries, the National Bureau of Economic Research Business Cycle Dating Committee, and related topics, see http://www.nber.org/cycles/main.html.
3 Gross domestic product grew 2.6 percent in the second quarter of 1991 and increased every quarter until the third quarter of 2000. The U.S. Department of Commerce’s Bureau of Economic Analysis produces estimates of gross domestic product; for more information, visit the agency’s website at http://www.bea.gov/bea/dn/home/gdp.htm.
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