The Slowdown in Government Hiring

Employment in the public sector has declined over the past three years as state and local governments struggle with budget shortfalls.  Public sector employees are unlikely to quit their jobs and government agencies lay off workers much less frequently than private sector firms.  Consequently government agencies adjust to budget reductions by larger reductions in the rate at which workers are hired.

The following chart shows that public employees are about 70% less likely to quit their job than private sector employees.  It also indicates that quit rates declined in the recession in both the government and private sectors.  Workers are more willing to stay in their current job as the prospect of a better job offer becomes less likely.

Layoff rates are also considerably lower in the government sector than in the private sector.  In 2010 the layoff rate in government peaked at about half the private sector rate.  In all other years over the past decade the public sector layoff rate was about 70% lower than in the private sector.

Government workers are much less likely to quit their jobs and government agencies are more reluctant to lay off workers than in the private sector.  Hiring reductions have become a primary way that government entities adjust to budget reductions.  The government hiring rate declined by 26.4% from 2007 to 2011 compared to a 14.7% decline in the private sector over the same period.  In the first quarter of 2012 government hiring was 18% below the 2007 rate.

The decline in government hiring is one reason why the unemployment rate has remained relatively high over the past few years.   According to the BLS JOLTS data about four million government workers were hired per year from 2004 to 2007.  In 2011 just over 3.2 million workers were hired into government jobs representing a decline of about 836,000 over the pre-recession average.

Alternatively, the Wall Street Journal’s Justin Lahart calculated that the unemployment rate would be 7.1% if there had been no cuts in state and local government jobs.  Lahart acknowledged that his calculations are based on the smaller and noisier household survey which may be poorly suited for tracking fluctuations in the number of government employees over time.

A 1% decline in the unemployment rate requires an employment increase of 1.54 million which is about 7% of total government employment.  A 7% increase in government employment would result in the highest government share of employment in three decades.  It seems plausible that budget cuts reduced government employment by an amount closer to 836,000 than 1.54 million workers.

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