If you want to ruin your day and purge your social life, spend some time digging through data at the Bureau of Labor Statistics. It's as unspectacular as it sounds.
But in doing so, you'll spot an important jobs-market trend that the media rarely cover.
Year to date, the private sector has added 650,000 jobs. That's slow, but not terrible. Yet the government sector -- even after adjusting for the short-term census hiring and firing -- has shed 224,000 jobs. And the private sector is roughly five times larger than the government sector, so in percentage terms, the plunge in government jobs is more extreme than it looks here.
Now compare that to our last recovery after the dot-com bubble recession. From November 2001 to November 2003, the private sector shed 884,000 jobs, while the government sector added 174,000. The result, of course, was still a net loss. But the job dynamic back then was almost the opposite of today. Eight years ago, government jobs softened the blow of the private sector's losses. Today, the private sector is making up for lost government jobs.
Why is this happening? In short, government tax revenue -- particularly at the state and local level -- has fallen off a cliff, while the financial condition of the private sector has rebounded nicely.
As the Center on Budget and Policy Priorities recently noted, "State tax revenues were 8.4 percent lower in the 2009 fiscal year than in 2008, and an additional 3.1 percent lower in 2010, while the need for state-funded services did not decline." The resulting disintegration of state finances has begun spiraling out of control. In downturns past, state and local governments could keep it together by pushing obligations out further into the future. But when there's no more money, there's no more money. Today, the bills are starting to come due, and the jobs are getting chopped. It's ugly.
In contrast, corporations have done a remarkable job quickly adjusting to the recession and getting back on track. Airlines are a great example. A few years ago, there was hardly an industry in worse shape than airlines. Fuel costs were surging. Seats were ominously empty. Blunt-force competition drove profits into the floor.
But that pain drove change. Competitors merged. Unprofitable flights were taken out of service, which slashed capacity and gave surviving airlines the renewed advantage of pricing power. Before long, the industry was reborn. Today, it's expanding.
This year, the airline industry will post its first profit since 2007 -- only its third profitable year in the last decade. Companies like United Continental Holdings
After a July jobs report that showed the third-largest private jobs gain in more than two and a half years offset by the largest drop in government workers during the same period, Ohio Rep. John Boehner (R) sounded off. "After another disappointing jobs report ... it's time for President Obama to listen to the American people and face up to the fact that his 'stimulus' policies aren't working. How many more times do families and small businesses have to ask 'where are the jobs' before President Obama changes course?"
Fair enough. But there lies the irony of our unfortunate reality. Many people want smaller government, and point to dismal jobs numbers to back up their reasoning. But what's causing those dismal jobs numbers? Smaller governments.
Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.
