Unemployment Rate Cushioned By Government Hiring

(MoneyWatch)  In July in some of the first good news the U.S. economy had seen in several months the unemployment rate actually declined slightly. It was down to 9.4 percent from about 9.6 percent. Many economists still predict it going higher as economic activity in the U.S. stagnates or perhaps continues to erode. In this month the sectors that actually added jobs were government, health care and accounting and computer services.

Many of the state and the Federal government continue to add workers despite the decrease in tax revenue and the rise of the deficit. Even in California broke to the tune of twenty-four billion dollars the legislature added three hundred thirty-six workers so far this year. That is at an estimated cost of over $14 million. The state as a whole added four thousand since June of last year. To many people this additional hiring when the state faces a catastrophe of spending really doesn't make sense.

Many states used "stimulus" money to keep jobs for teachers and law enforcement personnel rather then laying them off due to falling tax revenue. Unfortunately unless there is an economic recovery the money won't be there in a few years to keep those jobs. That is of course unless another stimulus bill is passed. This highlights a major criticism of that money. It was not used to pump up the economy like it was supposed to but provide some cushion to existing problems.

Many localities also used stimulus funds to keep their summer youth employment programs going. These are only temporary jobs and will go away as the new school year starts. There will also be issues with this hiring next year unless more money is available one way or another. The Federal deficit just passed $1.2 trillion for the year which may make it hard for this funding to continue.

The biggest concern facing economists about the end of the recession is like previous ones it may be "jobless". There is plenty of slack in the economy in terms of the amount of hours available at businesses. This means rather then hire new workers they will let the existing ones fill those hours. That means there won't be a spike in hiring or employment any time soon.

The Federal workforce has had a steady growth since 2000. There was a decline between 1990 and that year but much of this was in the area of military and defense employment. The peak year for government workers was 1945 which is not surprising. It can be expected that under the next few years of the Obama administration this trend will continue.

One can argue that a government job is just as good as another but it takes private sector funding through taxes to support it. Without a growth in this area the deficit will continue to grow and the that may not be sustainable.