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Government Jobs and the Economic Recovery in Metropolitan America (Updated June 24, 2011)

The current edition of Brookings’ MetroMonitor shows that government job growth is associated with the economic performance of America’s metropolitan areas since the beginning of the recession. Among the nation’s 100 largest metro areas, the 20 that have done the best since the recession started (taking into account recovery of jobs, output, unemployment rates, and house prices) are Augusta, Austin, Boston,   Buffalo, Columbus, Dallas, El Paso, Honolulu, Jackson, Knoxville, Little Rock, Madison, McAllen, Nashville, Oklahoma City, Omaha, Pittsburgh, Rochester, San Antonio, and Washington. Of these 20, all but three (Augusta, Buffalo, and Columbus) gained government jobs since total employment peaked in each metro area (see map here).

At the other extreme, the 20 large metro areas that have done the worst since the recession started are Bakersfield, Boise, Cape Coral, Detroit, Fresno, Jacksonville, Lakeland (FL), Las Vegas, Los Angeles, Miami, Modesto, New Orleans, North Port (FL), Orlando, Palm Bay, Phoenix, Riverside, Sacramento, Stockton, and Tampa. All but six of these (Bakersfield, Boise, Cape Coral, Jacksonville, Lakeland, and Tampa) lost government jobs since total employment peaked.

Increased government employment means increased government spending, which means increased demand for goods and services and the creation of more private sector jobs and more private sector income. That’s why government employment has mattered for metropolitan economic performance since the start of the recession. 

Trends in government employment during the recovery don’t bode well for the future of the recovery. Of the 88 large metro areas that have had any jobs recovery (i.e., in which total employment has rebounded from its recent low point), 50 lost government jobs during their recoveries. Local government jobs have been particularly hard-hit; while 50 large metropolitan areas lost federal government jobs and 43 lost state government jobs during their recoveries, 60 lost local government jobs.

Because of balanced-budget requirements at the state and local levels and politicians’ general reluctance to raise taxes, the burden of increasing government spending has to fall mainly on the federal government. The current mania in Congress to cut the federal budget deficit immediately, even while nationwide unemployment remains above 9 percent, is a move in the wrong direction. Big deficit cuts in a weak economy will only slow down what’s already, in most metro areas, a tepid recovery. Although current trends seem to indicate that this tepid recovery will continue, too much federal deficit-cutting too soon could push the nation and its metro areas into a double-dip recession.