Public Employment Still Hasn’t Caught Up From The Great Recession

The labor market has been booming for years, but the speedy recovery from the depth of the pandemic-induced recession has been uneven. Even as aggressive fiscal policy interventions helped state and local government employment recover much more quickly than after the Great Recession, it still took state and local government employment longer than private sector employment to regain all lost jobs. And, state and local government employment is still down as share of the overall labor market, when compared to its longer-term average before the austerity during and after the Great Recession that started in December 2007. Had state and local government employment maintained its share of total employment since then, there should have been 2.1 million more jobs in those sectors in February 2024 than there were. These missing workers have meant much worse working conditions for those employed by state and local governments and, as a result, poorer service for people, businesses, and communities.

State and local governments employ many more people than the federal government does. This should not be surprising. State and local governments provide a wide range of often labor-intensive services. Those services include public education, from kindergarten through high school, to community colleges and public four-year colleges and universities. They also include transit and public health as well as public safety such as police, firefighters, 911 operators, judges and corrections officers, to name just a few. Libraries, hospitals, parks and recreation, water, food and housing inspections, tax collections, auditors of state and local agencies, economic development agencies, retirement systems, and health insurance, most notably the administration of Medicaid, are all part of the range of services that state and local governments provide for people, businesses and communities. Everybody needs well-functioning public services on an almost daily basis to stay healthy and safe, to keep business costs down, and to grow local economies.

Yet, state and local government employment has dropped as a share of overall employment for a decade and a half, meaning that the service delivery has not kept pace with the growth of the economy. State and local government employees made up more than 14% of all employees in the years before the Great Recession started in December 2007 (see figure below). State and local governments drastically cut public services as their property, sales and income tax revenue fell in the worst recession since the Great Depression. The declines in the share of public employment continued as state and local governments tried to counterproductively shrink their way to renewed growth in a misguided austerity effort. State and local government employment dropped to 13.1% of total employment during the 12 months prior immediately before the pandemic started in March 2020. State and local government employment lagged behind the economy, even before the pandemic hit.

The pandemic brought on a new set of challenges. After more than a decade of austerity, state and local governments often could not compete with the wages and benefits offered in the private sector when the labor market came roaring back. State and local governments have had a lot of openings since the pandemic struck in early 2020, but they could not fill those. According to data from the Bureau of Labor Statistics, the rate of job openings to current jobs surged to well above 4%, about double its rate before the pandemic. Yet, the rate of hiring stayed at its historic rate of less than 2%. A lot of jobs simply went unfilled in state and local government. By October 2023, state and local government employment totaled 20 million again, as it had in February 2020. This was equal to a low of 12.7% of total employment. The state and local government employment share was only marginally higher, with 12.8% in February 2024. There would have been 2.1 million more state and local government employees if their share of total employment had stayed the same since before the Great Recession. The underinvestment in public services has added up over the past sixteen years, first pushed down by austerity measures and then by an inability of state and local governments to compete for workers.

The decline in state and local government employment relative to the size of the economy has serious consequences. The drops have been especially pronounced in local government employment, for instance, among teachers and school bus drivers, as well as other local services such as public safety and tax collection. The results have been fewer academic offerings, less support for children of all ages, overworked and overwhelmed public safety employees – think 911 operators having to work mandatory overtime for 60+ or even possibly 70+ hours per week – fewer inspections, less public safety, and less effective tax collections.

Boosting state and local government employment will ultimately translate into better public services. The question, though, is how to get more people to work for state and local governments in the current climate. Higher pay and better benefits will be a good start. Public employees, for example, often have less access to remote work options when those jobs can be done remotely, than is the case for private sector workers. State and local governments can also reduce other barriers to public employment, such as more frequent civil service exams. Public employees also need to have more control over their schedules. There is a lot of room for state and local governments to attract the workers necessary to deliver high-quality public services. The alternative of continued low state and local government employment will hurt people, slow businesses, and hamper communities.