Local Government Employment in U.S. Falls to Lowest Since 2006

The number of workers employed by local governments fell to the lowest level since October 2006 as U.S. cities and towns reduced the ranks of teachers and other school employees in a bid to cut costs.

Local governments employed 14.2 million, or 76,000 fewer people last month than in August, the biggest one-month decline since July 1982, according to data compiled by Bloomberg. Of the jobs cut, 50,000 were in education.

“State and local governments, particularly local governments, probably didn’t recall a lot of teachers,” Stuart Hoffman, chief economist of PNC Financial Services Group in Pittsburgh, said in a Bloomberg Television interview. “That is the weak spot in the report.”

Cuts in education, to a four-year low of 7.9 million jobs, reflect the struggle of local governments to balance budgets amid declining property values and falling tax receipts, according to the National League of Cities. Local general-fund revenue was projected to drop 3.2 percent in fiscal 2010 from 2009, when it fell 2.5 percent, the group said Oct. 6.

Nationwide, nonfarm employment fell by 95,000 while the unemployment rate held steady at 9.6 percent, the Labor Department said today. The economy lost 159,000 government jobs, almost half of them temporary Census workers, while nongovernment employers added 64,000.

Dropping Jobs

Government employment at the local level declined by 76,000 jobs, the Labor Department said. More than half, 55 percent, of local government employees work in schools, the agency said. At the state level, 46 percent work in education.

Since reaching record highs in mid-2008, local government employment has dropped 2.4 percent while those employed in education fell 2.5 percent, according to data compiled by Bloomberg.

Losses in education are concentrated in September because seasonal adjustments take into account the number of teachers who return to work as school years begin. A greater number than usual didn’t come back last month, producing the drop, said Heidi Shierholz, an economist with the Washington-based Economic Policy Institute. The nonprofit research group focuses on issues as they affect lower- and middle-income workers.

“Unlike other professions, there’s a clear calendar” for teachers, Shierholz said in a telephone interview.

Triple Threat

The effects on public education will be long-lasting, Ed Muir, a researcher with the Washington-based American Federation of Teachers, said in a telephone interview. The union has about 1.5 million members in 43 states, according to its website.

“We’ll be in the midst of this fiscal state crisis mode for a long time,” Muir said. “We’re dealing with three dynamics: fewer staff, rising enrollment and rapidly rising student poverty.”

In August, President Barack Obama signed into law a plan to provide $26 billion to help states pay Medicaid bills and prevent firings of teachers and other public workers.

“The weakness in public-sector employment is a drag on the private sector as well,” Obama said today at a speech in Bladensburg, Maryland. “We need to continue to explore ways that we can help state and local governments maintain workers who provide vital services.”

Not in Time

The $268 million in federal employment aid allotted to New Jersey may have come too late to help this year, said Frank Belluscio, a spokesman for the New Jersey School Boards Association.

“It appears that the majority of districts are going to use that next school year,” Belluscio said by telephone.

The education job cuts, which were concentrated in September as the school year started, are unlikely to repeat themselves, said Richard Berner, co-head of global economics at Morgan Stanley in New York.

“There might be some lingering weakness in general in state and local employment, but I don’t think the cutting of teachers will continue in coming months,” Berner said by telephone.

Schools funded by state governments fared little better than local ones. State education employment declined by 7,800 jobs to 2.39 million. Other state categories increased by 300, to 2.75 million, according to the Labor Department.

‘Body Slam’

“The recession put a body slam on state and local tax revenues,” said Nicholas Johnson, director of the state fiscal project at the Washington-based Center for Budget and Policy Priorities, which works on issues that affect low- and moderate- income Americans. “The services people need haven’t gone away at all.”

Governments have lagged behind private employers in cutting jobs, the statistics indicate. When job declines were at their worst during the recession that began in December 2007, private employment sank by more than 500,000 a month from October 2008 through April 2009. State and local-government employment fell by no more than 9,000, and rose in some months, according to data compiled by Bloomberg.

In each of the past nine months, private employers have added jobs, according to the data. Local-government jobs declined in each of those months except March, and state employment fell in six of the nine.

State and local governments have cut spending as slowly as they can to avoid firing workers, Johnson said by telephone. “As the states’ reserve funds run dry, they have fewer and fewer options.”

To contact the reporters on this story: Simone Baribeau in Miami at sbaribeau@bloomberg.net; Ashley Lutz in New York at alutz8@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

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