Where the Recession Continues: Local Government

Private firms have added hundreds of thousands of new jobs over the last two years, and even the federal government has grown somewhat since the recession. But as Shaila Dewan and Motoko Rich of The New York Times report, the last two years have seen government workforces especially hard hit. "Government payrolls grew in the early part of the recovery, largely because of federal stimulus measures. But since its postrecession peak in April 2009 (not counting temporary Census hiring), the public sector has shrunk by 706,000 jobs." Of those loses, over 400,000 were from local governments.

According to Dewan and Rich, "The losses appeared to be tapering off earlier this year, but have accelerated for the last three months, creating the single biggest drag on the recovery in many areas. "

"Although state tax revenues have started to recover and are estimated to exceed prerecession levels next year," governments have continued to see increases in the cost of the social services they provide, namely healthcare, pensions and education, and "more than a quarter of municipal governments are planning layoffs this year, according to a survey by the Center for State and Local Government Excellence."

"Even if the overall economy improves, local governments are likely to lag behind. Property tax receipts, which are projected to fall slightly in 2012, ‘will be weak through at least fiscal 2014,' wrote Daniel White, an economist at Moody's Analytics, in a report this month. ‘As a result, local government fiscal conditions will remain under pressure.'"