Government Jobs and the Economic Recovery in Metropolitan America

The current edition of Brookings’ MetroMonitor shows that government job growth is associated with the economic recovery of America’s metropolitan areas. Among the nation’s 100 largest metro areas, the 20 that have recovered most strongly from the recession (taking into account recovery of jobs, output, unemployment rates, and house prices) are Austin, Bakersfield, Baton Rouge, Boise, Bridgeport, Dallas, Des Moines, El Paso, Hartford, Houston, Little Rock, McAllen, Modesto, Nashville, New Haven, New Orleans, San Antonio, Salt Lake City, Seattle, and Washington. Of these 20, all but six (Baton Rouge, Bridgeport, Little Rock, New Haven, Salt Lake City, and Seattle) gained government jobs since total employment began to recover in each metro area (see map here).

At the other extreme, the 20 large metro areas that have had the most difficulty recovering from the recession are Albany, Allentown, Birmingham, Buffalo, Cape Coral, Chicago, Dayton, Detroit, Greensboro, Harrisburg, Jacksonville, Kansas City, Las Vegas, Pittsburgh, Portland (OR), Poughkeepsie, Providence, Scranton, Syracuse, and Youngstown. In five of these (Albany, Birmingham, Cape Coral, Kansas City, and Poughkeepsie), there has been no jobs recovery. Of the remaining 15, all but three (Jacksonville, Syracuse, and Youngstown) lost government jobs since total employment began to recover.

I haven’t been able to find anything else besides the growth of employment that’s as closely associated with the strength of metropolitan economic recovery. Increased government employment means increased government spending, which means increased demand for goods and services and the creation of more private sector jobs and more private sector income. 

Trends in government employment during the recovery don’t bode well for the future of the recovery. Of the 88 large metro areas that have had any jobs recovery (i.e., in which total employment has rebounded from its recent low point), 50 lost government jobs during their recoveries. Local government jobs have been particularly hard-hit; while 50 large metropolitan areas lost federal government jobs and 43 lost state government jobs during their recoveries, 60 lost local government jobs.

Because of balanced-budget requirements at the state and local levels and politicians’ general reluctance to raise taxes, the burden of increasing government spending has to fall mainly on the federal government. The current mania in Congress to cut the federal budget deficit immediately, even while nationwide unemployment remains above 9 percent, is a move in the wrong direction. Big deficit cuts in a weak economy will only slow down what’s already, in most metro areas, a tepid recovery. Although current trends seem to indicate that this tepid recovery will continue, too much federal deficit-cutting too soon could push the nation and its metro areas into a double-dip recession.