U.S. Local Governments Cut Payrolls to Lowest Level Since 2006

U.S. local-government payrolls fell to the lowest level in more than six years in a sign that municipalities still face fiscal strains almost three years after the end of the recession.

Employment by local governments, adjusted for seasonal hiring swings, dropped by 3,000 in March to 14.1 million, the lowest since February 2006, the U.S. Labor Department reported today. State payrolls helped offset the loss, showing a third straight month of gains, rising 2,000 to 5.1 million. It’s the longest streak of job increases at that level since 2008.

Municipalities, which depend largely on property taxes, are probably cutting jobs because the housing market is still rebounding and homeowners are pressing for lower assessments, said Alan Schankel, a managing director at Janney Montgomery Scott LLC in Philadelphia. State governments, which depend more on income and sales taxes, have also cut local aid to balance budgets in the wake of the recession that ended in June 2009.

“It’s kind of a double-whammy,” Schankel said in a telephone interview today. “There’s still stress at the local level.

State and local-government tax collections grew at the slowest pace in a year in the final quarter of 2011, the U.S. Census Bureau said last month. Revenue rose 2.1 percent from a year earlier to $387.2 billion. While it was the ninth straight advance, it was the smallest jump since the end of 2010. Property taxes rose 0.2 percent from a year before.

States and local governments have cut about 640,000 jobs combined since public-sector employment peaked in 2008.

To contact the reporter on this story: Michael McDonald in Boston at mmcdonald10@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net.

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