What to Watch on Jobs Day: Even Without Furloughed Workers, Government Employment is Still Too Low

Much of the focus last jobs day was on the government shutdown and its impact on the employment data for October. The November job numbers will likely show at least some reversal of October’s trends in the household survey data, including the increase in unemployment, decline in employment, and decline in labor force participation, as these movements were in part driven by the temporary furlough of government workers (while the BLS stated, and we reported, that the shutdown did not affect the labor force participation rate, further analysis suggests that it likely had some impact). Because of these distortions in the October household survey, the change from October to November will provide little information about the underlying labor market trend. Instead, it’s important to focus on shifts over longer time periods.

The talk about the government shutdown is largely a distraction from the larger issue, namely just how many jobs the economy needs to create to return to pre-recession levels of employment.

In addition to the economic ramifications of the 800,000 furloughed government employees in October, we still face a 1.43 million jobs shortfall in public sector employment. The graph below illustrates the public sector jobs gap from January 2000 through September 2013. In an effort to not overstate the jobs gap which may have temporarily occurred because of the government shutdown, we are omitting October’s numbers. On Friday, this will be updated through November 2013.

Overall, it’s clear that austerity driven job losses in the public sector have been an enormous drain on the recovery.