March 9 (Bloomberg) -- U.S. local-government payrolls increased last month for the first time since August, easing the drag on the economy brought on by budget-cutting cities, counties and school districts.
The U.S. Labor Department reported today that local-government employment, adjusted for seasonal swings in hiring, expanded by 2,000 in February as school districts boosted hiring. State payrolls slipped by 1,000 after rising by 11,000 in January.
Jim Diffley, an economist with IHS Inc. who tracks regional growth, said it’s too soon to say whether the employment outlook for state and local governments has shifted because more cuts could emerge from budget negotiations for the next fiscal year.
“There’s plenty of talk of continued retrenchment,” he said. “The worst part of the crisis is over. There have been a lot of cuts. But it’s not clear they’re out of the woods at all.”
U.S. state tax revenue has been growing at the fastest pace since 2006, according to Census Bureau data, helping to narrow the budget deficits that governors have dealt with for the past four years. Economic growth has been restrained as state and local governments reduced payrolls to make up for declines in tax collections. Together, some 647,000 state and local government jobs have been cut since public sector employment peaked in 2008.
The payroll increase in February was driven entirely by education, according to the Labor Department, with employment in other areas of government continuing to slip. Excluding school-related jobs, state government payrolls slid by 2,700, once adjusted for seasonal swings, while the number of workers at localities dropped by 3,900.
While local economies are beginning to mend, officials are still hesitant to boost hiring, according to a survey of 226 cities released by the National League of Cities today. Only 8 percent said they increased personnel over the last six months, according to the survey, which was conducted in February. Thirty-nine percent reported cuts.
“Our latest numbers point to improving local economic conditions,” Christopher Hoene, director of the league’s Center for Research & Innovation, said in a statement. “But we’re a long way from recovery. It’s clear that cities and city residents will still be confronting the impacts of this past recession for a while longer.”
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