Workforce Levels-Private & Gov.

[don]

Net Private Nonfarm Jobs vs. Temporary Jobs
Month	Private	Temporary	Net
Total	+1,171,000	+307,000	+864,000
Average	+106,500	+27,900	+78,500
November	+50,000	+39,500	+10,500
October	+160,000	+34,700	+125,300
September	+112,000	+27,300	+84,700
August	+143,000	+22,500	+120,500
July	+117,000	-6,700	+123,700
June	+61,000	+18,600	+42,400
May	+51,000	+30,400	+20,600
April	+241,000	+23,300	+217,700
March	+158,000	+32,300	+125,700
February	+62,000	+35,900	+26,100
January	+16,000	+49,200	-33,200

http://globaleconomicanalysis.blogsp...-pictures.html

[dcarrigg]

Re: Workforce Levels-Private & Gov.

Thank you Don...another piece that confirms that employment is going south in both sectors.

Moreover, another piece that shows how census employment inflated numbers. I keep thinking, why could employment rise so much on the $11B and change allocated to the 2010 census? 800,000 two month jobs. That would mean that about $80B should give you a million employees for a year. $800B - 10 million employees for a year or five for two years. Could cut into unemployment by 3% for two years directly with a stimulus-sized direct hire program to collect stats and build web pages. Stimulus bill is showing ~675,000 jobs...perhaps a 'super census' would have been a better way to go if job creation was a real goal.


Some source docs:
http://www.esa.doc.gov/02182010.pdf
http://www.gao.gov/new.items/d06822t.pdf
http://www.recovery.gov

[lakedaemonian]

Re: Workforce Levels-Private & Gov.

One questions:

Is it likely that the "canary in the coalmine" for public sector workers and their rising layoffs will move from local to state to federal based on their respective ability to play the "extend and pretend" game and their related relative credit risk levels?

[zoog]

Re: Workforce Levels-Private & Gov.

One questions:

Is it likely that the "canary in the coalmine" for public sector workers and their rising layoffs will move from local to state to federal based on their respective ability to play the "extend and pretend" game and their related relative credit risk levels?

Seems to me that's how it will play out. From the Meredith Whitney: 2011- Year of Defaults article:

A wave of defaults by state and local governments in the coming months will spark a selloff in the municipal bond market, hurting US economic growth and stocks and causing social unrest as governments are forced to lay off workers and cut back on services, well known financial analyst Meredith Whitney told CNBC Tuesday.
.
.
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"States clearly have been funding municipal governments—for now up to 40 percent of their total expenditures," she explained. "As the states become more compromised from a fiscal standpoint, that funding is going to end."

[metalman]

Re: Workforce Levels-Private & Gov.

Ej's creating a video on this. Here's the main exhibit.

• Government payrolls expanded by 1,759,000 since the year 2000.
• Local (towns and cities) governments expanded payrolls by 1,403,00
• 80% of government payroll growth was in local government
• Reduce local government payrolls to year 2000 levels and save $60,175,231,200 per year

The economy lost over 2.6 million jobs total between 2000 and 2010 while government added 1.8 million jobs.

The percent of all jobs that are government jobs increased from 19% to 21%.

Most of the payroll expenses are in education at 53% of the headcount, with police and hospitals a distant second at 12%, highways and prisons adding 9%, and all other functions less than 3% each.

How much do 1.8 million additional local government employees cost each? According to the BLS, about $43,000 each per year.

What if local government payroll employment is cut to year 2000 levels, higher than the current private sector employment level justifies?

It will save $60 billion per year.

[aaron]

Re: Workforce Levels-Private & Gov.

What has been the population increase since then? The interwebs says it has been about 10%. No, I do not think the growth in local government (education for chrissakes!) is the problem.

Let's start by ending the wars like we asked for when we voted for Obama.
Savings = 10 times as much as firing all the 40K-making teachers.

I sure hope EJ addresses this in his article. How about a few graphs showing college tuition versus war spending? My back of the envelope calculations say we could pay for college for everybody FOREVER for the same money we used to flatten 2 countries and rebuild them.

Yeah, the local teachers are the problem. Pleeeaaaaaaaase.

[dcarrigg]

Re: Workforce Levels-Private & Gov.

What has been the population increase since then? The interwebs says it has been about 10%. No, I do not think the growth in local government (education for chrissakes!) is the problem.

Let's start by ending the wars like we asked for when we voted for Obama.
Savings = 10 times as much as firing all the 40K-making teachers.

I sure hope EJ addresses this in his article. How about a few graphs showing college tuition versus war spending? My back of the envelope calculations say we could pay for college for everybody FOREVER for the same money we used to flatten 2 countries and rebuild them.

Yeah, the local teachers are the problem. Pleeeaaaaaaaase.

Exactly Aaron. I think that Metalman (and EJ) are a showing one-sided data by simply comparing flat numbers of public employees 2000 and present irrespective of population growth over that time whilst simultaneously comparing public employment to private employment to show "growth" in public employment simply because private employment declined so rapidly.

Again, I will say: public employment has been between 7.1% and 7.8% of total population for decades and has trended down towards the bottom of that range as of late. Census employees skew the data during the spring/summer of years that end in zero.

Resetting the number of public employees to 2000 levels to save a bit of cash would not be the end of the world in my mind - it would just be bigger class sizes, slower services, less police & fire etc. But it would be a sharp downward departure from the past 30 years of public employment levels in the 7% range. We could try it with 6% - it worked during the 70s. But don't state that by going to 2000 levels we are simply paring back the rapidly growing public workforce. It's intellectually dishonest.

[metalman]

Re: Workforce Levels-Private & Gov.

Exactly Aaron. I think that Metalman (and EJ) are a showing one-sided data by simply comparing flat numbers of public employees 2000 and present irrespective of population growth over that time whilst simultaneously comparing public employment to private employment to show "growth" in public employment simply because private employment declined so rapidly.

Again, I will say: public employment has been between 7.1% and 7.8% of total population for decades and has trended down towards the bottom of that range as of late. Census employees skew the data during the spring/summer of years that end in zero.

Resetting the number of public employees to 2000 levels to save a bit of cash would not be the end of the world in my mind - it would just be bigger class sizes, slower services, less police & fire etc. But it would be a sharp downward departure from the past 30 years of public employment levels in the 7% range. We could try it with 6% - it worked during the 70s. But don't state that by going to 2000 levels we are simply paring back the rapidly growing public workforce. It's intellectually dishonest.

i only reposted the itulip charts on this to add them to this thread... have no idea of the intention of the charts... i don't jump to the conclusion that ej approves of cuts in local gov't employees...

[zoog]

Re: Workforce Levels-Private & Gov.

i only reposted the itulip charts on this to add them to this thread... have no idea of the intention of the charts... i don't jump to the conclusion that ej approves of cuts in local gov't employees...

Periodically, FRED posts part of an upcoming article in threads that are at least tangentially related. I think it's primarily intended as a teaser, but without the context of the full article, sometimes the excerpt can be confusing. I think what iTulip is trying to show in the charts is that local and state governments are in financial trouble since various sources of revenue have declined. They will be forced to cut back on expenditures, and most of that will come from laying off schoolteachers because that's where most of the payroll is. I also don't think that iTulip is encouraging this outcome, they're just explaining the inevitability. But the somewhat terse number-crunching format makes it sound like iTulip is offering and supporting a neat and tidy budget-balancing solution.

[dcarrigg]

Re: Workforce Levels-Private & Gov.

i only reposted the itulip charts on this to add them to this thread... have no idea of the intention of the charts... i don't jump to the conclusion that ej approves of cuts in local gov't employees...

But the somewhat terse number-crunching format makes it sound like iTulip is offering and supporting a neat and tidy budget-balancing solution.

That's fair metalman. You very well may be right zoog. Something about the way that the data was presented just hit a nerve. Perhaps with the context of a full article I would not find it so alarming.

[EJ]

Re: Workforce Levels-Private & Gov.

Periodically, FRED posts part of an upcoming article in threads that are at least tangentially related. I think it's primarily intended as a teaser, but without the context of the full article, sometimes the excerpt can be confusing. I think what iTulip is trying to show in the charts is that local and state governments are in financial trouble since various sources of revenue have declined. They will be forced to cut back on expenditures, and most of that will come from laying off schoolteachers because that's where most of the payroll is. I also don't think that iTulip is encouraging this outcome, they're just explaining the inevitability. But the somewhat terse number-crunching format makes it sound like iTulip is offering and supporting a neat and tidy budget-balancing solution.

The municipal bond analysis we working on convinces us to maintain our long standing position on municipal bonds: the average 30 year 0.03% default rate on AAA municipal bonds will hold. Defaults will only occur in one-off, extreme cases.

iTulip's FIRE Economy Debt Repayment Rule #3 applies: bonds will be paid off even if every municipal service has to be cut, every other teacher, policeman, and firefighter laid off, the roads fill with potholes, and bridges have to be closed for safety reasons. You can already see it. Look around you. Fee will be layered upon fee. Fees for emergency services. Fees for snow clearing. Fees fro street cleaning. Permitting fees for heretofore unregulated activities, from home gardens to swimming pools. The most politically weak and vulnerable will bear the brunt of the new fees and taxes and spending cuts needed to maintain a flow of interest and principle payments on the bonds, but the flow will be maintained at all costs because the political power is in the hands of the bond holders.

The estimated $60 billion per year in savings on state and local government employee payrolls, that we identified and show in the charts, makes a fine target. Some of the cuts are justified. This will complicate the issue politically. But the principle to understand is that at this stage of the process, the debt will be paid -- local, state, and federal, foreign and domestic -- no matter the consequences to the economy.

After the economy devolves past a certain point, and the process can take a decade or more, socialists will win state elections and repudiate the debts, at which point indeed we will see bond defaults. This may also occur on a national level. If we are lucky they will be "socialists" with policies similar to Brazil's Socialist Democracy party that elected Luiz Inácio Lula da Silva President of Brazil in 2003. His pro-business, pro-trade, pro-production, fiscally conservative, anti-FIRE Economy (high interest rates) policies created an economic boom.

"Under Lula, Brazil became the world's eighth-largest economy, more than 20 million people rose out of acute poverty and Rio de Janeiro was awarded the 2016 Summer Olympics, the first time the Games will be held in South America."
— The Washington Post, October 2010

In other words, Lula is a Reagan Republican in socialist garb. At the meeting in NYC when I met Paul Volcker, he joked the the US needs a "so-called socialist like Lula." I presume he meant a libertarian in socialist clothing instead of the current Republican party that taxes production, not economic rent, and spends like there's no tomorrow.

Debt repudiations are political events, not so bad in and of themselves but they can come with heavy baggage. If we are not lucky then after one or two more economic crises the American voter decides capitalism rather than cronyism and financial oligarchy is the problem we may get not a socialist by word and libertarian by deed ala Lula but an actual socialist-socialist like Argentina got in Peronist Senator Eduardo Duhalde on December 31, 2001. The following week he announced the end of the currency peg and a plan to devalue the peso by 29%, from 1:1 to 1.4:1 to the dollar, for major foreign commercial international transactions, with a floating rate for all other transactions, in other words, a dual exchange rate system. "Other elements of economic plan included: converting all debts up to $100,000 to pesos (passing on devaluation cost to creditors); capital and bank account controls; a new tax on oil to compensate creditors for the losses that will ensue; renegotiating public debt, and a balanced budget."

But we have years and years to go before drastic measures are taken by a populist president. Meanwhile, outside the unofficial dollar peg to the euro, RMB, and yen, the market continues to devalue the dollar against gold. The role of monetary and fiscal stimulus will be to maintain enough demand and money growth to keep the economy growing despite the debt payments drain on households and businesses.

Think of a bucket full of holes, with water leaking out the bottom and the Fed and Congress pouring new water in from the top, via monetary and fiscal policy, to maintain a constant rising water level. But the government water -- money lent into existence by the government -- that pours in from QE and additional government borrowing is not the same as the the water -- money lent into existence by the private sector -- that is produced organically through economic activity in the private sector. Think of the private sector money as drinking water and government money as antifreeze. In small amounts it poses little danger to the money supply. But used over an extended period to maintain the overall money level in the economy, the water (money supply) becomes polluted with sovereign credit risk, much as is was polluted with private credit risk previously. That process can go on and on for years and years until an outside event triggers a crisis.

The process of decay overall will be slow and uneven. In many ways the economy will improve, largely due to technological improvements to productivity. This will help offset some of the weakness brought on by debt deflation. But the physical infrastructure -- the four factor of production -- will continue to decline and this will have a negative impact on overall sentiment. There is a section that I deleted from my book before it went to print because I thought it was too dark for the mainstream. I made the case that Americans living in sparkling middle class towns are about to find out why the shabby towns around them look that way: no money to fix the roads, paint the graffiti, pay for police, tear down abandoned home, and so on. It's no accident that the term “Broken Window Syndrome" was born in the early years of the FIRE Economy, by New York City sociologists in 1982. The term arises from the observation that a single broken window pane in an industrial area, left untreated, quickly escalates into more broken windows, graffiti, and increased vandalism. Fix the broken window pane quickly, the cycle never begins. But it takes money to fix that broken window quickly, and in many towns and cities across American, there will be neither the funds nor the will.

[ThePythonicCow]

Re: Workforce Levels-Private & Gov.

But we have years and years to go before drastic measures are taken by a populist president.

Jolly fine post, EJ. Thank-you. That post goes a long way in providing the "Forecast" that someone recently lamented that they could not find in your 2010 Review and 2011 Forecast thread.

If there is a more rapid and dramatic resolution to our predicament, it will be by means outside those you consider so fluently ... aka a black swan.

Those of us who spend so much time anticipating the specifics of such a black swan are usually wrong ... usually.

[c1ue]

Re: Workforce Levels-Private & Gov.

Think of the private sector money as drinking water and government money as antifreeze. In small amounts it poses little danger to the money supply. But used over an extended period to maintain the overall money level in the economy, the water (money supply) becomes polluted with sovereign credit risk, much as is was polluted with private credit risk previously. That process can go on and on for years and years until an outside event triggers a crisis.

In principle your analysis as always is quite clear.

The point which I differ is that to me the present circumstances show that the US is already more than a decade down this road, indeed arguably it could be said that the US has been using this method ever since 1986.

In this light, while I agree that the ship of the United States turns slowly and is hard to sink, I nonetheless point out that equally the inertia of its decade plus of incorrect motion will be as difficult to turn to the correct path and that the damage done is equally as difficult to repair.

Even given this, repair and return to the right path is not impossible, but there is not even the slightest hint of a knowledgeable hand at the controls and in the workshop.

Thus my ongoing (and consistent since 2005) opinion is that the US is going to experience at 30% plus decline in average standard of living and that much of this will be accomplished not by ice, but by FIRE induced rapid, if not hyper- inflation. Note that the only reason there is only a 30% drop is due to ongoing technological/productivity increases. The actual apples to apples drop will be considerably larger.

Historically this process has nearly always induced a populist dictator which in turn does even more damage.

[we_are_toast]

Re: Workforce Levels-Private & Gov.

iTulip's FIRE Economy Debt Repayment Rule #3 applies: bonds will be paid off even if every municipal service has to be cut, every other teacher, policeman, and firefighter laid off, the roads fill with potholes, and bridges have to be closed for safety reasons. You can already see it. Look around you. Fee will be layered upon fee. Fees for emergency services. Fees for snow clearing. Fees fro street cleaning. Permitting fees for heretofore unregulated activities, from home gardens to swimming pools. The most politically weak and vulnerable will bear the brunt of the new fees and taxes and spending cuts needed to maintain a flow of interest and principle payments on the bonds, but the flow will be maintained at all costs because the political power is in the hands of the bond holders.

With all due respect:

I'm not at all sure about this. We already see some cities, Hamtramck Mich., Harrisburg PA, at least considering bankruptcy. These may be a very few exceptions, but we'll have to see.

When municipalities start cutting every other teacher, Fireman, policeman, I think you're going to see torches and pitchforks showing up at city council meetings. If you've ever attended a normal city council meeting, you can see how quickly they can get very loud. I'm not sure the pressure of screaming mothers and just robbed small business owners isn't going to overcome the pressure of an anonymous bond holder. I would also keep in mind that city council members tend not to be the most informed or knowledgeable about economics, otherwise they would have never fallen for the FIRE scam in the first place. So I'm not sure they would put the same level of importance on a bond default as you might.

If the first few cities that default actually come out of it better than those undergoing severe austerity, other cities might quickly join in a wave of strategic defaults like we saw in the housing market bust.

In other words, Lula is a Reagan Republican in socialist garb.

I'll take strong exception with this and leave it at that.

we may get not a socialist by word and libertarian by deed ala Lula but an actual socialist-socialist like Argentina got in Peronist Senator Eduardo Duhalde on December 31, 2001.

Personally, my fear is that we will get a Libertarian by word, and a Fascist by deed, like Silvio Berlusconi, and many in the newly elected congress. Although I would prefer neither Socialist nor Fascist, we may indeed be heading to the extremes. Beware of the Ides of March. I look toward the budget and national debt battles shaping up for February and March to be very telling of the true nature of the newly elected politicians. If they are who I fear they are, a trigger for a new world wide economic crises may be closer than we think.

[dcarrigg]

Re: Workforce Levels-Private & Gov.

Thank you EJ. The post does well to clarify the thoughts behind the data presented.

Interestingly, there is now talk of actually letting municipalities fail.

Central Falls in RI is a tiny square mile of a city, but among the most densely populated in the nation. It made national news last year when President Obama supported the decision to fire all of the school teachers at Central Falls high school. The school was taken over by the state years ago because of mismanagement. The city subsequently became insolvent for all intents and purposes.

Rhode Island is a state that doesn't allow for municipalities to declare Chapter 9 bankruptcy. The solution then is receivership with a state-appointed receiver. The receiver is now recommending dissolution of the city. The recommendation is to have neighboring Pawtucket annex it:

http://online.wsj.com/article/BT-CO-...16-710344.html.

This being said, Central Falls RI is like Pritchard AL in that it has had chronic problems over the last decade. Still, they may foreshadow things to come.