Government Dependency

According to the Associated Press, some two million people hold federal jobs. Contrasting this with the 11 million Americans who are currently out of work begs the question, "Just what is the need for this many fed jobs at this time?" What is more, the Obama stimulus plan, such as it is suggested, includes a number of provisions that point to an increased need for federal workers and also government workers at the state level. - Sylvia Cochran, Local Government and Fed Jobs Increase While Private Sector Jobs Decrease, Associated Content, February 2, 2009

As Federal Stimulus Fades, Private Hiring Falters

Surge in Census jobs in May masks underlying employment weakness

June 4, 2010

MSNBC - Friday's employment report underscores the critical transition now underway in the U.S. economy. As the impact of government stimulus fades, job creation will have to come from growth in the private sector.

The latest data on the job market weren't encouraging.

A wave of hiring by the government brought a surge in employment; some 431,000 jobs were added for the month. But almost all of them were temporary Census Department jobs that will last for only a few weeks or months. Private sector employers added just 41,000 net new workers to their payrolls in May. Payroll gains were revised downward for March and April by a combined 22,000.

Even forecasters who are upbeat about the economic recovery were discouraged by the numbers.

“You’ll need to see (job gains) of about 200,000 to be considered a serious advance,” said Robert Barbera, chief economist at ITG.

The large number of census jobs added in May will also weigh on employment data in the months ahead. As those short-term jobs expire, they’ll count as jobs lost in the upcoming payroll data.

After a deep contraction that sidelined more than 8 million workers, the U.S. economy posted solid gains in the second half of 2009 and the first quarter of this year. The big snap back was fueled by two powerful forces.

1. First, after panicky businesses slashed production deeply during the recession, inventories of unsold goods all but dried up. A surge in restocking lifted production. But so far, it hasn’t been matched by a big increase in demand.


2. A bigger tailwind came from an historic boost from the federal government — in the form of hundreds of billions of dollars of emergency spending and tax cuts. That stimulus effect has now largely played out, which means the positive impact on the economy is now beginning to fade, which is expected to bring a slowdown later this year. Economists at Goldman Sachs figure GDP growth of three percent in the first half of the year will fall to 1.5 percent in the second half.

The expiration this month of the tax credit for first-time home buyers, for example, is expected to bring a sharp pullback in home sales this summer. The May employment data — showing a drop in construction jobs — may already reflect that housing slowdown, according the Wells Fargo chief economist John Silvia.

Government hiring is also under severe pressure as state and local government’s struggle with a sharp drop in revenues and big budget deficits. Unlike the federal government, state and local agencies can’t borrow to fund the shortfall, which bring more immediate pressure to cut spending. In May, state and local governments cut 22,000 jobs; with more budget cuts looming, those layoffs will likely continue in coming months.

Last month’s employment report — showing a gain of 218,000 private sector jobs in April — had offered hopeful signs that the job market was gaining strength even as government stimulus was winding down. But the numbers for May has cast doubt on that scenario.

“V-shaped recoveries don't have months where we create 40,000 jobs,” said Dan Greenhaus, Miller Tabak's chief economic strategist.

The weak showing for the job market in May also cast doubt on the stock market’s increasingly wobbly advance. European stock markets sold off sharply as the numbers were released, followed by slumping U.S. stock markets.

Other measures of the job market’s strength in May were also mixed. The number of job wanted ads was flat, according to a survey by the Conference Board. An employment survey by the Institute for Supply Management posted a modest gain. Payroll processor ADP reported weak private sector job gains of 55,000 net new hires. The number of people collecting unemployment benefits rose a bit, and the level of new jobless claims is running about 450,000 a week. That’s higher than during past economic recoveries.

“The two areas of potential vulnerability for the economy remain payrolls and housing — and they're both staggering a good deal,” said Art Cashin, UBS’ director of floor operations at the New York Stock Exchange. “And we keep losing close to 1 million people every two weeks. If we're not adding them back in, this is going to be a problem.”

There were some hopeful signs in the numbers. The length of the average works week ticked up a bit, as employers added hours for existing workers. That’s usually a sign of a pickup in demand which, if it continues, will lead to more hiring.

The increase was especially strong in the manufacturing sector, where the average work week increased by 0.3 hours for the month — triple the overall gain in hours worked.

“That's really important because that gives us a gauge of strength in industrial production,” said Chris Probyn, chief economist at State Street global Advisors. “And it looks to me as if the manufacturing hours puts a nice increase in industrial production in the month of May.”

Wages also inched up a bit a bit in May, which will help support consumer spending:

“You can add a million jobs but if everyone gets paid 20 cents an hour it won't make a difference,” said Dan Greenhaus chief economic strategist at Miller Tabak. “You look at jobs to see what people's incomes are and their spending power.”

The overall numbers also mask big disparities in the job outlook for different sectors of the workforce.

Nearly half of those looking for work have been out of a job for more than six months. Older workers — those over 55 — are out of work longer that younger age groups. Nearly 60 percent of older workers were out of a job for six months or more compared to 44 percent of younger workers.

Low-skilled workers are faring much worse than the headline numbers suggest. The unemployment rate for those without a high school diploma rose to 15.0 percent in May; the rate for workers with a college degree fell to 4.7 percent.

“That disparity reflects the continued evolution of labor demand in America over the last twenty years,” said John Silvia, chief economist at Well Fargo.

Senate Approves Jobless Payments to Millions

July 21, 2010

Associated Press – State unemployment agencies are gearing up to resume sending unemployment payments to millions of people as Congress moves to ship President Barack Obama a measure to restore lapsed benefits.

After months of increasingly bitter stalemate, the Senate passed the measure Wednesday by a 59-39 vote.

Obama promised to quickly sign the legislation into law once the House takes a final vote on Thursday.

"Americans who are working day and night to get back on their feet and support their families in these tough economic times deserve more than obstruction and partisan game-playing," Obama said in a statement Wednesday night, criticizing the "roadblocks by a partisan minority" that for weeks stalled the measure's passage in the Senate.

It's a welcome relief to 2 1/2 million people who been out of work for six months or more have seen their benefits lapse.

Under best-case scenarios, unemployed people who have been denied jobless benefits because of a partisan Senate standoff over renewing them can expect retroactive payments as early as next week in some states. In other states, it will take longer.

State unemployment and labor agencies have been preparing for weeks for Congress to restore jobless payments averaging $309 a week for almost 5 million people whose 26 weeks of state benefits have run out. Those people are enrolled in a federally financed program providing up to 73 additional weeks of unemployment benefits.

About half of those eligible have had their benefits cut off since funding expired June 2. They are eligible for lump sum retroactive payments that are typically delivered directly to their bank accounts or credited to state-issued debit cards.

The Senate continued debating the measure a full day after a GOP filibuster was defeated by a 60-40 vote. Senate rules required 30 hours of debate, but missing no opportunity to seize a political edge, Democrats attacked Republicans for not waiving them and requiring an additional day of debate.

"Republicans are declaring an all-out war on unemployed Americans," said Jim Manley, spokesman for Majority Leader Harry Reid, D-Nev. "Even though Democrats have the votes to give unemployed workers the safety net they deserve, Republicans are callously delaying the vote for an entire day."

In fact, the measure could have been passed months ago had Democrats not insisted on coupling it with a host of other, more controversial legislation, such as tax increases on hedge fund managers and on some small businesses that were used to pay to renew a popular package of tax breaks for individuals and businesses.

The resulting delays required two temporary unemployment insurance extensions — one came only after a lapse in coverage because Reid adjourned the Senate for its two-week Easter recess rather than engage in a time-consuming battle with Republicans. Benefits were restored retroactively.

Democrats have become more aggressive in attacking the GOP for opposing the measure, which has been stripped down so that it's essentially limited to a $34 billion, six-month renewal of unemployment insurance for the chronically jobless.

Republicans say they support the benefits extension but insist any benefits be financed by cuts to programs elsewhere in the $3.7 trillion federal budget. Maine GOP moderates Olympia Snowe and Susan Collins were the only Republicans to support the bill Wednesday. Sen. Ben Nelson of Nebraska was the only Democrat to break with his party to oppose the bill.

Many Republicans have voted in the past for deficit-financed benefits extension, including as recently as March and twice in 2008, during the Bush administration. But now they are casting themselves as opposing out-of-control budget deficits, a stand that's popular with their core conservative supporters and tea party activists whose support they're courting in hopes of retaking control of Congress.

Democrats tout the economy-boosting effect of unemployment checks since most beneficiaries spend them immediately, and they say that paying for them with cuts to other programs dilutes the stimulative effect.

"Extending unemployment insurance isn't just the right thing to do. It's also the smart thing to do for our economy," said Sherrod Brown, D-Ohio.

Economists say the measure will likely have a modest beneficial effect on the economy. It represents less than one-quarter of 1 percent of the size of the $14.6 trillion economy, and is far smaller than last year's $862 billion stimulus legislation. Republicans have blocked Democratic add-ons, such as aid to state governments, that could have meant a greater economic boost.

32 States Have Borrowed from the Federal Government to Make Unemployment Payments

May 21, 2010

EconomicPolicyJournal.com - Thirty two states have run out funds to make unemployment benefit payments. The federal government has been supplying these states with funds so that they can make their payments to the unemployed. In some cases, states have borrowed billions. As of May 20, the total balance outstanding by 32 states (and the Virgin Islands) is $37.8 billion.

The state of California has borrowed $6.9 billion. Michigan has borrowed $3.9 billion, Illinois $2.2 billion.

Below is the full list of the 32 states (and the Virgin Islands) that have borrowed from the federal government to make unemployment payments, and the amounts that remain borrowed as of May 20 (numbers in red are billions).

Alabama $283 million

Arkansas $330 million

California $6.9 billion

Colorado $253 million

Connecticut $498 million

Delaware $12 million

Florida $1.6 billion

Georgia $416 million

Idaho $202 million

Illinois $2.2 billion

Indiana $1.7 billion

Kansas $88 million

Kentucky $795 million

Maryland $133 million

Massachusetts $387 million

Michigan $3.9 billion

Minnesota $477 million

Missouri $722 million

Nevada $397 million

New Jersey $1.7 billion

New York $3.2 billion

North Carolina $2.1 billion

Ohio $2.3 billion

Pennsylvania $3.0 billion

Rhode Island $225 million

South Carolina $886 million

South Dakota $24 million

Tennessee $21 million

Texas $1.0 billion

Vermont $33 million

Virginia $ 346 million

Virgin Islands $13 million

Wisconsin $1.4 billion

Total $37.8 billion