Monday, June 7, 2010

State Governments Still Cutting Jobs To Meet Balanced Budget Requirements

Government jobs have been trending downwards as local and state governments struggle to balance their budgets. The inability for local governments to improve the job situation in difficult times may be a weakness of the balanced budget requirements. See the following post from Economist's View.

State and local governments could use more help:

State and Local Governments Continuing to Lose Jobs, Off the Charts: States and localities cut 22,000 jobs in the past month, wiping out half the month’s gain in private-sector jobs... In total, state and local governments have cut 231,000 jobs, including 100,000 local education jobs, since the summer of 2008.

This is a problem for the economy as a whole, because local businesses suffer when teachers and others don’t have paychecks to spend. These new figures are further evidence that Congress needs to include aid to states in its upcoming jobs bill...
This is a no brainer, but Congress hasn't done anywhere near enough to help so far, and it is unlikely to do so now even for the "low hanging fruit". I think one of the lessons of the crisis is that we need to develop better mechanisms to prevent state and local government from magnifying the effects of crises. The balanced budget requirements that that most state and local government operate under cause them to decrease demand at a time when they should be boosting it.

This post has been republished from Mark Thoma's blog, Economist's View.

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