Government losses a big part of state unemployment increases

On Monday, The New York Times released a nice graphic showing the changing trends in state unemployment rates immediately before the recession, immediately after the recession, and today. As my colleague Doug Hall explains in a recent blog post, the graphic highlights the lack of significant job growth for the country as a whole, and the exceptionally dire conditions for 11 states in particular. Eight of these 11 states have actually experienced an increase in their unemployment rate since June 2009: Alabama, California, Florida, Georgia, Illinois, North Carolina, and South Carolina.

To get a better understanding of what’s driving the uptick in unemployment for these eight states, I broke down the changes in total employment by major industry category from June 2009 to Aug. 2011. If you calculate the number of jobs lost in each major industry as a percentage of the total jobs lost for each state—excluding all industries that gained jobs—the numbers are very telling. In five of the eight states (California, Georgia, Illinois, North Carolina, and South Carolina), the largest proportion of jobs lost was in the government sector. In both California and South Carolina, more than half the jobs lost were in government. Alabama, Florida, and Nevada saw their largest job losses in construction, which might be expected given the enormous losses those three states took when the housing bubble burst.

States nationwide have had to deal with severe budget shortfalls, and many state legislatures have turned to massive budget cuts as the cure-all. With so many states struggling to regain jobs lost during the recession, adding public sector workers to the ranks of the unemployed is clearly a step in the wrong direction. Moreover, addressing budget shortfalls through budgets cuts not only decimates the public sector workforce, but it also devastates the private sector. (My colleague Ethan Pollack’s research shows that, “for every dollar of budget cuts, over half of the jobs and economic activity will be lost in the private sector, for a number of reasons,” including the fact that a significant portion of state spending is  on goods and services supplied by the private sector.)

Click table to enlargestate_jobloss_by_industry